Tax Relief Program

7/30/2019 Tax Relief Program

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Tax Relief Program

Exempts minimum wage earners in the private sector and their counterparts(casual employees)

in the public sector from paying income tax.[Republic Act No. 9504]

Personal exemptions up.

Status OLD Tax

Law

NEW Tax Law

Single P20,000 P50,000

Head of The Family P25,000 P50,000

Married P32,000 P50,000

Additional Deduction for Every Qualified Dependents P8,000 P25,000

For instance, a family of one working spouse with 3 qualified dependents will have a totalofP125,000.00 in personal exemptions. (from the OLD P 56,000.00)

The law classify a DEPENDENT as a legitimate, illegitimate or legally adopted child living with

the taxpayer and not more than 21 years old, unmarried and not employed.

New Tax Table For January 2009


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Tax Computation in the Philippines1. The first step is you should answer the following questions below:

What is Your Status? (Single or Married?)

Do You Have Any Dependent? How Many?

How much is your Monthly Basic Pay(salary)?(This does not include your overtime pay/monetary value of

your late/tardiness,holiday pay, but includes the monthly allowance that you received.)

2. How much is your SSS,Philhealth,and HDMF (Pag-Ibig) monthly contributions?

With your Monthly Basic Pay you can immediately know your contributions. Just refer to this table below:
http://philippinestaxcomputation.blogspot.com/2009/06/tax-computation-in-philippines.htmlhttp://philippinestaxcomputation.blogspot.com/2009/06/tax-computation-in-philippines.html


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Suppose your monthly basic pay(salary) is P11,000.00 then by looking at the table above(under the column ofRange of Compensation) just find the range of compensation that includes P11,000.00 and simply move your

eyes horizontally and look for your corresponding SSS Contribution(under the main column Social Securityand sub-column EE or Employee Contribution).So what did you see? P366.70 right?.

Now just try it on your own,suppose your monthly basic pay(salary)is P14,000.00 what is your SSS

Contribution? Answer:P466.70

Since you already know how to look for your SSS Contribution it is time for you now to know how much is youremployer's contribution counterpart.Again, find the Range of Compensation where you belong,move your

eyes horizontally, and just look under the main column Social Security and sub-column ER or EmployerContribution.

Suppose you have a P11,000 monthly basic pay (salary) then the ER or Employer Contribution would be

P777.30 and your total monthly contribution that debit in the SSS is P1,144 (P777.30 +P366.70).

If your monthly basic pay (salary) is P14,000, what is your employer contribution?your totalcontribution? Answer: ER= P989.30 ; TC= P1456.00

For Philhealth:


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Illustration:

For instance you have a monthly basic pay (salary) ofP11,000, then your Philhealth Monthly Contribution

would be P137.50. How did I get this figure?It is simple,just look for the column under Monthly Salary Rangeand find for the interval where your salary belongs. After that, move your eyes horizontally(to the right) and

find for the corresponding Philhealth Monthly Contribution under the Employee's Share Column.Got that???It

is easy right?Now, take your try.

Example my gross basic pay (salary) is P14,000.00,how much is my Philhealth Monthly Contribution?Answer:P175.00

Aside from this it is also better and wise to know your employer's contribution counterpart .Again, going

back to the Philhealth Table above just look for the column under Employer's Share that corresponds toyour monthly gross income.If your monthly gross income is P11ooo.00 then your Employer's Share is

P137.50 and the total amount that debit in your Philhealth Contribution is P275.00 (Employee'sShare + Employer's Share).

For HDMF/Pag-Ibig Contribution:

Illustration:

If your Monthly Basic Pay (Salary) is P11,000 then your HDMF Contribution is P11,000.00 X .02 = P220

and your Employer's Counterpart is P11,000.00 X .02 = P220 . This computation is so easy.After youknow where your Gross Monthly Salary Range belong just multiply it by the MULTIPLIERthat

corresponds to your monthly basic pay (salary) .The total monthly contribution that debit in your HDMF

Contribution is P440.00 monthly.

Note: You can also demand to your Finance Officer or Human Resource Officer if you want to increase yourHDMF Monthly Contribution.Why should you do that?These are the reasons:


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If you want to avail a housing loan. (The bigger contribution you have the bigger the money later on that

you can loan for your housing loan.

To reduced your monthly withholding tax. Even the difference is minimal still it is an advantage to your

part.Why let the government get your money and can't even avail the priviledges.It is better to invest

your money in HDMF than letting it see in the "trust" fund of our government.NOTE: If you increaseyour HDMF Contribution you will reduce the tax that the government get from you and at the

same time you are investing it to have a better house that you will own someday.

3. Are you receiving other allowances like laundry allowance,transportation allowances ,riceallowances,etc.? If yes how much?

You need this later on when you compute your withholding tax because these are not taxable. Failure to notethis may result to erroneous result of computation.

4.What is TAXABLE INCOME?

Taxable income is the portion of income that is the subject of taxation.

In the Philippines our taxable income is determined by this formula:

Taxable Income = [Gross (Basic)Monthly Income+ Overtime Pay+Holiday Pay+Night Differential] -(minus) [Tardiness Deduction+Allowances+SSS Contribution+Philhealth Contribution,HDMF

Contribution]

Note: I did not include and subtract the amount of personal exemptions(exemptions due to your

status like:Head of the Family,Single,Married etc.) since your corresponding personal exemptionscan be see later on in the tax table and your personal exemption is included already in the formula

for computing the tax.You will understand it clearly later on when I introduce the general formula ofwithholding tax computation.

5.Factors you need to consider when solving your withholding tax (Applicable for Old Tax Ruling).

Factors that increases your tax:

Overtime Pay

Holiday Pay

Night Differential

Factors that decreases your tax:

Late/Tardiness

Allowances

SSS Contribution

Philhealth Contribution

HDMF Contribution

Personal Exemptions (ex. single, head of the family, head of the family with qualified dependents,etc)

6.You must have a copy of BIR Tax Table (See TABLE)

7. Knowing the General Formula of Withholding Tax ,Knowing the Parts and to Use the Tax Table,

and Computing Your Withholding Tax

General Formula:

Withholding Tax = ( ([Taxable Income] - [Bracket or Exemption] ) x [%over] ) + [Bracket Tax orBase Tax]

Where as Taxable Income=[Gross (Basic)Monthly Income+ Overtime Pay+Holiday Pay+Night

Differential] - (minus) [Tardiness Deduction+Allowances+SSS Contribution+PhilhealthContribution,HDMF Contribution]

Note: Before Solving For your Withholding Tax, find your Taxable Income first and simply substitute

the value in Withholding Tax Formula.

Parts of Tax Table

Bracket or Exemption

%over

Bracket Tax or Base Tax


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Illustration:

Assuming your tax is computed in a monthly basis and you already computed your TAXABLE INCOME

(not your gross income) totaling to P8,558 and you are Single then:

Corresponding Bracket or Exemption:P6,667.00Corresponding %over: 15% or.15

Corresponding Bracket Tax or Base Tax: P208.33

Question: Why did I use the amount P6,667.00 as the Bracket or Exemption for the taxable incomeof P8,558? Why not P5,000 with a %over of 10% or P4,167 with a %over of 5%?Do you know why?

Answer: Of course there is a way on finding your corresponding Bracket or Exemption and %over given

your Taxable Income but I will not introduce it here since it is a long process that requires your arithmeticskills.I am just considerate for those who are poor in Math. Anyway, I will still share my precious trick that I

am sure you will all understand it in an easy and direct way. I am 100% sure of this number trick since Ialready tested it a thousand times.It is better to understand it if I will show a series of examples. Here are they:

When finding for the corresponding Bracket or Exemption and %over just look:

1. The row of your STATUS(ex. Single,Head of the Family,Married,and etc.)on the table.2. Then look for the greatest number that is less than to your Taxable Income(within the row of

your STATUS).This is now your bracket or exemption.3. After you found it,move your eyes vertically upward(on the tax table)and look for your corresponding %

over and Bracket Tax or Base Tax.

Example 1:

Given:

Assuming Withholding Tax Computed Monthly

Taxable Income: P8558.00

Status: Single(S)

Answer:

Corresponding Bracket or Exemption:P6,667.00

Corresponding %over: 15% or.15Corresponding Bracket Tax or Base Tax: P208.33

Computing Your Withholding Tax:

Withholding Tax = ( ([Taxable Income] - [Bracket or Exemption] ) x [%over] ) + [Bracket Tax or


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Base Tax]

Withholding Tax =[(P8558.00-P6,667.00) X .15] + P208.33Withholding Tax =P491.98

Example 2:

Given:

Assuming Withholding Tax Computed MonthlyTaxable Income: P12,540.00

Status: Single or Married with 1 Qualified Dependent (S1 or M1)

Answer:

Corresponding Bracket or Exemption:P12,083.00

Corresponding %over: 20% or.20Corresponding Bracket Tax or Base Tax: P708.33

Withholding Tax = ( ([Taxable Income] - [Bracket or Exemption] ) x [%over] ) + [Bracket Tax or Base Tax]

Withholding Tax =[(P12,540.00-P12,083.00) X .20] + P708.33

Withholding Tax = P799.73

Example 3:

Given:

Assuming Withholding Tax Computed Monthly

Gross or Basic Income: P11,000.00Monthly Transportation Allowance:P500.00

Monthly Rice allowance:P500.00

Late/Tardiness:2hrsOvertime: 4 hrs(regular day)HDMF /Pag-Ibig Contribution: P300.00

Status: Married with 2 Qualified Dependents (M2)Days of Duty:22 days (8hrs per day)

Problem:How much is your monthly withholding tax given the information above?

Solution:

a.With your Gross or Basic Income totaling to P11,000.oo you can directly compute for your SSS and PhilhealthContribution. By looking on the SSS and Philhealth tables above your respective contributions are as follows:

SSS Contribution:P366.70

Philhealth Contribution:P137.50

b.Computing for the corresponding value of late/tardiness and overtime pay Given your gross monthlysalary of P11,000.00 then the monetary value of your

late/tardiness is:

Total Number of Hours Worked: 22 X 8 = 176 hours

Rate Per Hour: P11,000.00 /(divided by) 176 = P62.5


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The Monetary Value of Late/Tardiness: 62.5 X 2 = P125.00

Given your gross monthly salary of P11,000.00 then the monetary value of theovertime is:

Note: The overtime pay per hour for regular day is 125% (1.25)of your hourly rate

Overtime Rate Per Hour: 62.5 X (1.25) = P78.125

Total Overtime Pay: P78.125 X 4hrs = P312.5

c.Solving For Taxable Income.(I skip this process in my two previous examples since the taxable income is

already given but in this example the given is gross or basic salary instead of taxable income. General Formula:

Taxable Income=[Gross (Basic)Monthly Income+ Overtime Pay+Holiday

Pay+Night Differential] - (minus) [Tardiness Deduction+Allowances+SSSContribution+Philhealth

Contribution,HDMF Contribution]

Taxable Income=[ P11,000.00 + P312.5 ] - [ P125.00 + P500.00 + P500.00 +P300.00 + P366.70 + P137.50]

Taxable Income= [11,312.5]-[1929.2]

Taxable Income= P 9383.3

d.Solving for the corresponding withholding tax.

Corresponding Bracket or Exemption:P9167.00

Corresponding %over: 10%Corresponding Bracket Tax or Base Tax: P41.67

Withholding Tax = ( ([Taxable Income] - [Bracket or Exemption] ) x [%over] ) + [Bracket Tax or Base Tax]

Withholding Tax = ( ([P9383.3] - [P9167.00] ) x [.10] ) + [41.67]

Withholding Tax=P63.3

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Tax Relief Program