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WITHHOLDING TAX

Codal Reference: Republic Act Nos. 8424, 9337, 9442, 9504


Sections 57 to 58 and 78 to 83 of the National Internal Revenue Code (NIRC)
Power of Taxation Overview
Power by which the sovereign through its law making body
raises revenue to defray the necessary expenses of government
from among those who in some measure are privileged to enjoy
its benefits and must bear its burdens.

TAXES – enforced proportional contributions from the persons


and property levied by the law-making body of the State by
virtue of its sovereignty in support of government and for public
needs.
Types of Withholding Tax
1. Withholding Tax at Source:
a. Final Withholding Tax
b. Creditable Withholding Tax (Expanded
withholding tax)

2. Withholding Tax on Compensation (Wages)

3. Withholding Tax on Creditable Value-Added Tax

4. Withholding of Percentage Tax


Withholding Tax on Compensation is the tax
withheld from income payments to individuals
arising from an employer-employee relationship.

Compensation means any remuneration


received for services performed by an employee
from his employer under an employee-employer
relationship.
Elements of Withholding Tax on
Compensation
1. There must be an employer employee
relationship

2. There must be payment of compensation or


wages for services rendered

3. There must be a payroll period.


Compensation Exempted:

1. Remunerations received as an incident of


employment.
2. Remunerations paid for agriculture labor.
3. Remunerations paid for domestic services.
4. Remunerations for casual not in the course
of an employer’s trade or business.
5. Compensation for services of a citizen,
resident of the Philippines, for a foreign
government or an international
organization.
6. Damages
7. Life Insurance
8. An amount received by the insured as return
of premium
9. Compensation for injuries and sickness
10. Income exempt under treaty
11. 13th month pay and other benefits
12. GSIS, SSS, Philhealth and other
contributions
REVISED WITHHOLDHING TAX TABLE
(Based on TRAIN LAW)
The Bureau of Internal Revenue (BIR) has
circularized the Revised Withholding Tax Table which
should be used in computing the tax to be withheld on
every payment of compensation to employees.

The Table is effective from January 1, 2018 to


December 31, 2022. Under the TRAIN law, there will
be revised rates of the individual income tax effective
on January 1, 2023.
PERSONAL AND ADDITIONAL
EXEMPTION
1. PERSONAL EXEMPTION
For single individual or married individual judicially
decreed as legally separated with no qualified
dependents…............……...…………PHP 50,000.00
For head of family……….....………....PHP 50,000.00
For each married individual *.............PHP 50,000.00

Note: In case of married individuals where only


one of the spouses is deriving gross income, only
such spouse will be allowed to claim the personal
exemption.
A head of the family refers to any single or legally separated
man or woman who has the following kinds of dependents
enumerated below:

.
1.) One or both of the taxpayer's parents living with
him and dependent on him for chief support.

2.) One or more brothers and sisters who are living


with the taxpayer; not more than 21 years old; not
married; and not gainfully employed; or incapable of
self-support because of mental or physical defect,
regardless of age.
3.) One or more children who are legitimate,
illegitimate or adopted; living with the taxpayer;
married; not dependent on him for chief support;
not. more than 21 years old; and not gainfully
employed; or incapable of self-support because of
physical or mental defect, regardless of age.

4.) One or more senior citizens, whether relatives or


not, who are living with the taxpayer; dependent on
him for chief support; at least 60 years old and have
an annual income of not more than Php60,000.00.
2. ADDITIONAL EXEMPTION
1. For each qualified dependent, a PHP25,000 additional
exemption can be claimed but only up to 4 qualified
dependents.

The additional exemption can be claimed by the following:

A. The husband who is deemed the head of the family unless


he explicitly waives his right in favor of his wife

B. The spouse who has custody of the child or children in case


of legally separated spouses. Provided, that the total amount of
additional exemptions that may be claimed by both shall not
exceed the maximum additional exemptions allowed by the Tax
Code.
C. The individuals considered as Head of the Family
supporting a qualified dependent
.
Note: “Dependent Child” 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.
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