2.

The withholding tax from July 6 to December 31, 2008 shall be computed using the Revised Transitional Withholding Tax Table;

3. MWEs whose compensation earned from January 1 to July 5, 2008 were not subject to withholding tax but are, after considering the relevant exemptions, still subject to income tax, shall be required to file an income tax return covering the period from January 1 to July 5, 2008, on or before April 15, 2009; 4. The personal and additional exemptions applicable for calendar year 2008 shall be as follows:
Jan. 1 to July 5 Personal Exemption Single Head of the Family Married Additional exemption for every QDC * * qualified dependent child 4,000 12, 500 16, 500 P10,000 12,500 16,000 P25,000 25,000 25,000 P35,000 37,500 41,000 July 6 to Dec. 31

If the employee fails to file the Certificate of Update of Exemptions and of Employers and Employee Information (BIR Form No. 2305) together with the attachments the employer shall withhold the taxes based on the reported personal exemptions existing prior to the change of status and without reflecting any change. When did Republic Act (RA) No. 9504 took effect? RA 9504 took effect on July 6, 2008 after it was published in the June 21, 2008 issue of Malaya. What BIR issuance implements RA 9504?

Total

Revenue Regulations No. 10-2008 implements the provisions of RA 9504. The said issuance was published on the September 25, 2008 issue of the Philippine Star.

When is the deadline for submission of documentary requirements? All necessary documents for update of status and claim of additional dependents should be submitted to their employers not later than October 31, 2008. What are the consequences for the failure to file the Application for Registration or Certificate of Update of Exemption and of Employers and Employees Information? If the employee fails or refuses to file an Application for Registration (BIR Form No. 1902) together with the required attachments the employer shall withhold the taxes prescribed under the Schedule for Zero Exemption of the Revised Withholding tax table;

Prepared by:
TAXPAYER INFORMATION and EDUCATION DIVISION TAXPAYER ASSISTANCE SERVICE

BUREAU of INTERNAL REVENUE

3/18//09

Introduction
Revenue Regulations (RR) 102008 implements the provisions of Republic Act (RA) No. 9504, An Act Amending Sections 22, 24, 34, 35, 51, and 79 of RA 8424, as amended, Otherwise Known as The National Internal Revenue Code relative to the withholding of income tax on compensation and other concerns.

Compensation income of employees in the public sector with compensation income of not more than the Statutory Minimum Wage in the nonagricultural sector. What other incomes of MWEs are exempted from withholding tax and also income tax per R.A 9504? The following income of MWEs shall be exempted: a) Holiday pay; b) Overtime pay; c) Night shift differential pay; and d) Hazard pay. What other incomes of MWEs derived from employment are subject to withholding tax? The following additional compensation of MWEs are subject to withholding tax, namely: 1. Commissions; 2. Honoraria; 3. Fringe Benefits; 4. Benefits in excess of the allowable statutory amount of P30,000; 5. Taxable allowances; and 6. Other income other than SMW, holiday pay, overtime pay, hazard pay and night differential.
Note: The SMW shall be subject to withholding tax and income tax, as a consequence.

b. Additional Exemptions An individual, whether single or married shall be allowed an additional exemption of P 25,000 for each qualified dependent child not exceeding four (4) dependents. The additional exemptions shall only be claimed by one of the spouses in case of married individuals.
Note: Please see rates for CY 2008.

Definition of Terms: 1.Minimum Wage Earner (MWE) - shall refer to those who are working in the private and public sector being paid the Statutory Minimum Wage (SMW) as fixed by the Regional Tripartite Wage and Productivity Board (RTWPB)/ National Wages and Productivity Commission (NPWC). 2.Statutory Minimum Wage (SMW) - refers to the rate fixed by the RTWPB as defined by the Bureau of Labor and Employment Statistics (BLES) of the Department of Labor and Employment (DOLE). The RTWPB of each region shall determine the wage rates in the different regions based on the established criteria and shall be the basis of exemption from income tax for this purpose. 3.Withholding tax on compensation refers to the method of collecting the income tax at source upon receipt of the income. It applies to all employed individuals whether citizens or aliens, deriving income from compensation for services rendered in the Philippines. The employer is constituted as the withholding agent. 4.Qualified Dependent Child (QDC) means a legitimate, illegitimate or legally adopted child chiefly dependent upon and living with the taxpayer if such dependent is not more than twenty-one (21) years of age, unmarried and not gainfully employed or if such dependent, regardless of age, is incapable of self-support because of mental or physical defect. 5.Exemption - means the amount of exemption in thousand pesos an employee is entitled to claim as a deduction from gross compensation income in accordance with the status and number of qualified dependent children. What are EXEMPTED from withholding tax on compensation per R.A 9504? The following income payments are exempted from the requirements of the withholding tax on compensation: Compensation income of Minimum Wage Earners (MWEs) who work in the private sector and being paid the Statutory Minimum Wage (SMW); and

What happens during the transitory period?

In the implementation of these Regulations, the following shall apply during the transition period: 1. For update of status and additional exemption: a) All employees with change of status and number of qualified dependent children shall accomplish and file BIR Form 2305 (Certificate of Update of Exemption and of Employers and Employees Information), for employees already registered with the BIR; b) For those with no TIN, they should accomplish BIR Form 1902 (Application for Registration for Employee). Documentary Requirements: i. Marriage Contract; ii. Birth Certificate of each qualified child(ren), certified by the Local Civil Registry Office/ National Statistic Office (NSO)/equivalent documents issued by a government office previously requiring certified copy showing the name of parent/s and the name of the QDC with birth date (e.g passport of QDC as certified by companys Human Resource Officer) ; iii. Certificate of Employment if husband is working abroad; iv. Sworn Declaration and Waiver of Right to Claim Exemptions of Qualified Dependent Child(ren) by husband in case wife is claiming the additional exemptions of the children; v. Medical Certificate of qualified dependent child, if physically/mentally incapacitated; vi. Court decision of legal adoption of children; vii. Death Certificate; viii.Other documentary evidence, where the above documents are not available.

Is income of MWEs derived from the conduct of trade, business or practice of profession exempt from withholding tax and income tax? No, they are subject to withholding tax except those income upon which a final tax is imposed. However, the SMW of the MWE is still exempt from withholding tax and also income tax. What are the new rates for personal and additional exemption for individual taxpayer? Starting Calendar Year (CY) 2009, the following are the new rates for exemptions: a. Basic Personal Exemptions Individual taxpayers regardless of status are entitled to P 50,000 personal exemption.