Withholding

Tax on
Compensation

6
eVer. 2.1 AUG 2023
 Withholding Tax on Compensation

Compensation or Wages

means all remuneration for services performed by

an employee for his employer under an employee-
employer relationship unless exempted by the
NIRC and pertinent laws.

7
eVer. 2.1 AUG 2023
 Kinds of Compensation

Regular Compensation

includes basic salary, fixed allowances for

representation, transportation and others paid to
an employee.

8
eVer. 2.1 AUG 2023
 Kinds of Compensation

Supplementary Compensation - includes payments to an employee in addition to the

regular compensation as follows:
 Commissions
 Overtime pay
 Fees, including director’s fees
 Profit sharing
 Monetization of leave credits
 Sick Leave
 Fringe benefit received by rank & file employee
 Hazard pay
 Taxable 13th month pay
 Other remuneration received from an employee-employer relationship

9
eVer. 2.1 AUG 2023
 Exemptions from Withholding Tax on Compensation

 Remuneration received as an incident of employment

(RA 7641; those with approved reasonable private retirement plan;
Social Security Act 1954, as amended; GSIS Act of 1937, as amended;
and etc.);
 Remuneration paid for agricultural labor;
 Remuneration for domestic services;
 Remuneration for casual labor not in the course of an employer's trade
or business;

10
eVer. 2.1 AUG 2023
 Exemptions from Withholding Tax on Compensation

 Compensation for services by a citizen or resident of the Philippines for

a foreign government or International Organization;
 Damages (Actual, moral, exemplary and nominal);
 Life insurance;
 Amounts received by the insured as a return of premium;
 Compensation for injuries or sickness;

11
eVer. 2.1 AUG 2023
 Exemptions from Withholding Tax on Compensation

 Income exempt under treaty

 Thirteenth (13th) month pay & other benefits
 GSIS, SSS Medicare & other contributions (employee’s share
only);
 Compensation income of minimum wage earners (MWEs) who
work in the private sector and being paid the Statutory Minimum
Wage (SMW), as fixed by the Regional Tripartite Wage and
Productivity Board (RTWPB) / National Wages Productivity
Commission (NWPC), applicable to the place where he/she is
assigned;

12
eVer. 2.1 AUG 2023
 Exemptions from Withholding Tax on Compensation

 Compensation income of employees in the public sector with

compensation income of not more than Statutory Minimum
Wage in the non-agricultural sector as fixed by the RTWPB/NWPC
applicable to the place where he/she is assigned
 “De Minimis Benefits” enumerated under Revenue Regulations
(RR) No. 5-2011, as amended by RR 8-2012;
 Fringe benefits given to employees other than rank and file and
subjected to Fringe Benefits Tax (FBT);

13
eVer. 2.1 AUG 2023
 Exemptions from Withholding Tax on Compensation

 Personnel Economic Relief Allowance (PERA) given to government

employees;
 Representation and Transportation Allowance (RATA) granted to
public officers and employees under the General Appropriations
Act; and
 Compensation during the year not exceeding Two Hundred Fifty
Thousand Pesos (P250,000.00)

14
eVer. 2.1 AUG 2023
 Minimum Wage Earners

No withholding tax shall be required on the Statutory Minimum Wage (SMW) of

the Minimum Wage earner in the private/public sectors as defined in RR 2-1998,
as amended by RR 11-2018, including:
 Holiday pay
 Overtime pay
 Night shift differential
 Hazard pay
of Minimum Wage Earners (MWE) in the private/public sectors as defined by
these Regulations.

15
eVer. 2.1 AUG 2023
 Minimum Wage Earners

Provided further, that additional compensation such as:

 commissions
 honoraria
 fringe benefits
 benefits in excess of the allowable statutory amount of P90,000.00
 taxable allowances and other taxable income other than the SMW
given to a MWE by the same employer other than those which are expressly
exempt from income tax shall be subject to withholding tax using the withholding
tax table.

16
eVer. 2.1 AUG 2023
 De Minimis Benefits Not Subject to Withholding Tax

 Monetized unused vacation leave credits of private employees not

exceeding ten (10) days during the year;
 Monetized value of vacation and sick leave credits paid to government
officials and employees;
 Medical cash allowance to dependents of employees not exceeding
One Thousand Five Hundred Pesos (P1,500.00) per employee per
semester or Two Hundred Fifty Pesos (P250.00) per month;
 Rice subsidy of Two Thousand Pesos (P2,000.00) or one (1) sack of
fifty (50) kg. rice per month amounting to not more than Two
Thousand Pesos (P2,000.00);

17
eVer. 2.1 AUG 2023
 De Minimis Benefits Not Subject to Withholding Tax

 Uniform and clothing allowance not exceeding Six Thousand Pesos

(P6,000.00) per annum;
 Actual medical assistance, e.g., medical allowance to cover medical and
healthcare needs, annual medical/executive check-up, maternity
assistance, and routine consultations, not exceeding Ten Thousand
Pesos (P10,000.00) per annum;
 Laundry allowance not exceeding Three Hundred Pesos (P300.00) per
month;

18
eVer. 2.1 AUG 2023
 De Minimis Benefits Not Subject to Withholding Tax

 Employees achievement awards e.g., for length of service or safety

achievement, which must be in the form of a tangible personal
property other than cash or gift certificate, with annual monetary value
not exceeding Ten Thousand Pesos (P10,000.00) received by the
employee under an established written plan which does not
discriminate in favor of highly paid employees;
 Gifts given during Christmas and major anniversary celebrations not
exceeding Five Thousand Pesos (P5,000.00) per employee per annum;
and

19
eVer. 2.1 AUG 2023
 De Minimis Benefits Not Subject to Withholding Tax

 Daily meal allowance for overtime work and night/graveyard shift not
exceeding twenty-five percent (25%) of the basic minimum wage on a per
region basis.
 Benefits received by an employee by virtue of a collective bargaining
agreement (CBA) and productivity incentive schemes provided that the total
annual monetary value received from both CBA and productivity incentive
schemes combined do not exceed ten thousand pesos (P10,000.00) per
employee per taxable year.
All other benefits given by employers which are not included in the above enumeration
shall not be considered as “de minimis” benefits, and hence, shall be subject to income tax
as well as withholding tax on compensation income.

20
eVer. 2.1 AUG 2023
Tax Rates

21
eVer. 2.1 AUG 2023
 Steps to Determine the Amount of Tax to
be Withheld (TRAIN LAW)

Step 1.
Determine monetary and non-monetary compensation paid to an employee for the
payroll period: monthly, semi-monthly, weekly, daily, as the case maybe, excluding non-
taxable benefits and mandatory contributions.
 Classify taxable compensation into regular and supplementary compensation.
 RATA granted to public officers and employees under the General Appropriations Act
and the PERA which essentially constitute reimbursement for expenses incurred in the
performance of government personnel’s official duties shall not be subject to income
tax and consequently to withholding tax.

22
eVer. 2.1 AUG 2023
 Steps to Determine the Amount of Tax to
be Withheld (TRAIN LAW)
Step 2.
Use the appropriate table in Annex “D” (for compensation paid from January 1, 2018 to
December 31, 2022) or Annex “E” (for compensation paid from January 1, 2023 onwards) of
RR No. 11-2018 and select the applicable payroll period.
Step 3.
Determine the compensation range of the employee by taking into account only the total
amount of taxable regular compensation income and apply the applicable tax rates
prescribed thereon.
Step 4.
Compute the withholding tax due by adding the tax predetermined in the compensation
range as indicated on the column used and the rate of tax on the excess of the total
compensation over the minimum of the compensation range.

23
eVer. 2.1 AUG 2023
 Revised Withholding Tax Tables
(Effective January 1, 2018 under RR 11-2018)
DAILY 1 2 3 4 5 6
Compensation Range ₱685 and below ₱685 - ₱1,095 ₱1,096 - ₱2,191 ₱2,192 - ₱5,478 ₱5,479 - ₱21,917 ₱21,918 and above
0.00 +20% over ₱82.19 +25% over ₱356.16 +30% over ₱1,342.47 +32% over ₱6,602.74 +35% over
Prescribed Withholding Tax 0.00
₱685 ₱1,096 ₱2,192 ₱5,479 ₱21,918
WEEKLY 1 2 3 4 5 6
₱4,808 and
Compensation Range ₱4,808 - ₱7,691 ₱7,692 - ₱15,384 ₱15,385 - ₱38,461 ₱38,462 - ₱153,845 ₱153,846 and above
below
0.00 +20% over ₱576.92 +25% over ₱2,500.00 +30% over ₱9,423.08 +32% over ₱46,346.15 +35% over
Prescribed Withholding Tax 0.00
₱4,808 ₱7,692 ₱15,385 ₱38,462 ₱153,846
SEMI-MONTHLY 1 2 3 4 5 6
₱10,417 and
Compensation Range ₱10,417 - ₱16,666 ₱16,667 - ₱33,332 ₱33,333 - ₱83,332 ₱83,333 - ₱333,332 ₱333,333 and above
below
0.00 +20% over ₱1,250.00 +25% over ₱5,416.67 +30% over ₱20,416.67 +32% over ₱100,416.67 +35%
Prescribed Withholding Tax 0.00
₱10,417 ₱16,667 ₱33,333 ₱83,333 over ₱333,333
MONTHLY 1 2 3 4 5 6
₱20,833 and
Compensation Range ₱20,833 - ₱33,332 ₱33,333 - ₱66,666 ₱66,667 - ₱166,666 ₱166,667 - ₱666,666 ₱666,667 and above
below
0.00 +20% over ₱2,500.00 +25% over ₱10,833.33 +30% over ₱40,833.33 +32% over ₱200,833.33 +35%
Prescribed Withholding Tax 0.00
₱20,833 ₱33,333 ₱66,667 ₱166,667 over ₱666,667

24
eVer. 2.1 AUG 2023
 Withholding Tax Rates
(January 1, 2018 until December 31,2022)

Range of Taxable Income Tax Due – a + (b x c)

Basic Amount Additional Rate Of Excess Over
Over Not Over
(a) (b) (c)
- 250,000.00 - - -
250,000.00 400,000.00 - 20% 250,000.00
400,000.00 800,000.00 30,000.00 25% 400,000.00
800,000.00 2,000,000.00 130,000.00 30% 800,000.00
2,000,000.00 8,000,000.00 490,000.00 32% 2,000,000.00
8,000,000.00 - 2,410,000.00 35% 8,000,000.00

25
eVer. 2.1 AUG 2023
 Withholding Tax Rates
(Effective January 1,2023 and onwards)
REVISED WITHHOLDING TAX TABLE
Effective January 1, 2023 and onwards
DAILY 1 2 3 4 5 6
Compensation P 685 and P 685 – P P 1,096 – P P 2,192 – P P 5,479 – P P 21,918 and
Range below 1,095 2,191 5,478 21,917 above
0.00 0.00 P 61.65 P 280.85 P 1,102.60 P 6,034.00.30
Prescribed
Withholding Tax + 15% over P + 20% over P + 25% over + 30% over P + 35% over P
685 1,096 P2,192 5,479 21,918
WEEKLY 1 2 3 4 5 6
Compensation P 4,808 and P 4,808 – P P 7,692 – P P 15,385 – P P 38,462 – P P 153,846 and
Range below 7,691 15,384 38,461 153,845 above
0.00 0.00 P 432.60 P 1,971.20 P 7,740.45 P 42,355.65
Prescribed
Withholding Tax + 15% over P + 20% over P + 25% over P + 30% over P + 35% over P
4,808 7,692 15,385 38,462 153,846

26
eVer. 2.1 AUG 2023
 Withholding Tax Rates
(Effective January 1,2023 and onwards)

REVISED WITHHOLDING TAX TABLE

Effective January 1, 2023 and onwards
SEMI-MONTHLY 1 2 3 4 5 6
Compensation P 10,417 and P 10,417 – P P 16,667 – P P 33,333 – P P 83,333 – P P 333,333 and
Range below 16,666 33,332 83,332 333,332 above
0.00 0.00 P 937.50 P 4,270.70 P 16,770.70 P 91,770.70
Prescribed
+ 15% over P + 20% over P + 25% over P + 30% over P + 35% over P
Withholding Tax 10,417 16,667 33,333 83,333 333,333
MONTHLY 1 2 3 4 5 6
Compensation P 20,833 and P 20,833 – P P 33,333 – P 66,667 – P P 166,667 – P 666,667 and
Range below 33,332 P66,666 166,666 P666,666 above
0.00 0.00 P 1,875.00 P 8,541.80 P 33,541.80 P 183,541.80
Prescribed
+ 15% over P + 20% over P + 25% over P + 30% over P + 35% over P
Withholding Tax 20,833 33,333 66,667 166,667 666,667

27
eVer. 2.1 AUG 2023
 Withholding Tax Rates
(Effective Date January 1,2018-December 31,2022)

Range of Taxable Income Tax Due – a + (b x c)

Over Not Over Basic Amount Additional Rate Of Excess Over

(a) (b) (c)
- 250,000.00 - - -
250,000.00 400,000.00 - 20% 250,000.00
400,000.00 800,000.00 30,000.00 25% 400,000.00
800,000.00 2,000,000.00 130,000.00 30% 800,000.00
2,000,000.00 8,000,000.00 490,500.00 32% 2,000,000.00
8,000,000.00 - 2,410,000.00 35% 8,000,000.00

28
eVer. 2.1 AUG 2023
 Withholding Tax Rates
(Effective Date January 1,2023)

Range of Taxable Income Tax Due – a + (b x c)

Over Not Over Basic Amount Additional Rate Of Excess Over

(a) (b) (c)
- 250,000.00 - - -
250,000.00 400,000.00 - 15% 250,000.00
400,000.00 800,000.00 22,500.00 20% 400,000.00
800,000.00 2,000,000.00 105,000.00 25% 800,000.00
2,000,000.00 8,000,000.00 402,500.00 30% 2,000,000.00
8,000,000.00 - 2,202,500.00 35% 8,000,000.00

29
eVer. 2.1 AUG 2023
 Year-end Adjustment

On or before the calendar year and prior to the payment of the

compensation for last payroll period, the employer shall
determine the sum of the taxable regular and supplementary
compensation paid to each employee for the whole year and must
ensure that the tax due is equal to tax withheld.

30
eVer. 2.1 AUG 2023
 Requirement for Deductibility

The provisions of Sec 2.58.5 of RR 2-98, as amended, shall apply. Provided,

that compensation income where no income taxes were withheld pursuant
to Section 2.79(A) of these regulations, shall be allowed as deduction from
an employer’s gross income when the required employees withholding
statement (BIR Form No. 2316) have been issued to subject employees in
accordance with Sec. 2.83.1 of RR 2-98, as amended. Provided, further, that
the Alphabetical List of the subject employees, including MWEs, shall be
submitted under BIR Form Nos. 1604-C and F with Alphalists of Employees in
accordance with Sec. 2.83.2 of RR 2-98, as amended.

31
eVer. 2.1 AUG 2023
 Sec. 2.79.1 Application for Registration for
Individuals Earning Compensation Income

 Name/Taxpayer’s Identification
Require  Number/Residential Address
Information  Civil Status of employee, whether single, married, legally
separated, widow or widower
 Occupational status of the spouse

Require  Reduced requirements to 2, namely:

Forms and  Any identification issued by any government body
Attachments  Copy of marriage contract, if married

32
eVer. 2.1 AUG 2023
 Sec. 2.79.1 Application for Registration for
Individuals Earning Compensation Income

EMPLOYEE EMPLOYER BIR

Accomplishes Fill out Part Receives the
BIR Form 1902 IV of the BIR duly
and submits Form 1902 accomplished
to employer and Submits BIR Form 1902
to the BIR

Within Ten (10) Days From Date of Employment

33
eVer. 2.1 AUG 2023
 Sec. 2.79.1 Application for Registration for
Individuals Earning Compensation Income

WITHIN TEN (10) WITHIN THE LAST DAY OF

DAYS FROM THE MONTH OF RECEIPT
SUCH CHANGE OF THE ‘1905’

EMPLOYEE EMPLOYER BIR

Accomplishes Receives Receives the
BIR Form 1905 the BIR duly
and submits Form 1905 accomplished
to employer and submits BIR Form 1905
to BIR

In Case of Update of Registration Information

34
eVer. 2.1 AUG 2023
 BIR Forms to be Accomplished by the Employee

BIR Form No. 1902 - this form is being accomplished within ten (10) days
from date of employment.

BIR Form No. 1905 - this form is being accomplished in case of

replacement copy of certificate of registration, replacement copy of TIN
card, cessation of registration, cancellation of TIN and other update of
registration information.

35
eVer. 2.1 AUG 2023
 Responsibilities of Employer

 Submit the duly-accomplished BIR Form Nos. 1902 and /or 1905 to the
RDO within thirty (30) days from receipt;
 Withhold the tax due from the employees following the prescribed
manner;
 Remit the amount of tax withheld from the employee within the
prescribed due dates;
 Do the year-end adjustment;

36
eVer. 2.1 AUG 2023
 Responsibilities of Employer

 Submit Annual information return (BIR Form 1604-C), including

the required alphabetical list of employees/payees on or before
January 31 following the close of the calendar year;
 Issue the Certificate of Compensation Payment/Tax Withheld
(BIR Form 2316) to the employees; and
 Refund excess tax withheld.

37
eVer. 2.1 AUG 2023
Substituted
Filing

38
eVer. 2.1 AUG 2023
 Substituted Filing

 An individual taxpayer will no longer have to personally file his own

Income Tax Return (BIR Form No. 1700) but instead the employer’s
Annual Information Return on Income Taxes Withheld (BIR Form No.
1604C) filed will be considered as the “substitute” ITR of the employee.

 Effectivity - Year 2001 voluntary basis

- Year 2002 and thereafter mandatory

[RR 3-2002, RR 19-2002 and RMC 7-2014]

39
eVer. 2.1 AUG 2023
 Requisites for Individuals Qualified for Substituted Filing and
May No Longer / No Need to File BIR Form No. 1700

 Receives purely compensation income regardless of amount;

 Compensation from only one employer in the Philippines for the calendar
year;
 Income tax has been withheld correctly by the employer (tax due equals tax
withheld);
 The employee’s spouse also complies with all the three conditions stated
above;
 An individual earning purely compensation income whose income does not
exceed TWO Hundred Fifty Thousand (P250,000.00)

40
eVer. 2.1 AUG 2023
 Requisites for Individuals Qualified for Substituted Filing and
May No Longer / No Need to File BIR Form No. 1700

 A minimum wage earner as defined in RR No. 8-2018;

 Employer files the BIR Form 1604-C and F; and
 The employer issues each employee BIR Form No. 2316 (July 2018 ENCS or any
later version)

Note: All of the above requisites must be present. The Annual Information Return of
Income Taxes Withheld on Compensation and Final Withholding Taxes (BIR Form
Nos. 1604-C&F) filed by their respective employers duly stamped “Received”, shall be
tantamount to the substituted filing of income tax returns by said employees.

41
eVer. 2.1 AUG 2023
 Sec. 2.83.4 Substituted Filing of ITR by Employees
Receiving Purely Compensation Income

Individual not qualified for Substituted Filing of ITR:

 Those deriving compensation from two or more employers concurrently

or successively;

 Those income tax of which has not been withheld correctly;

 Those deriving other non-business, non-professional-related income in

addition to compensation income not otherwise subject to a final tax;

42
eVer. 2.1 AUG 2023
 Sec. 2.83.4 Substituted Filing of ITR by Employees
Receiving Purely Compensation Income

Individual not qualified for Substituted Filing of ITR:

 Individuals receiving purely compensation from a single employer with
income tax due has been correctly withheld, but whose spouse falls any of
the aforesaid items under (1), (2) and (3);
 Non-resident aliens engaged in trade or business in the Philippines,
deriving purely compensation income, or compensation income and other
non-business, non-professional-related income.

43
eVer. 2.1 AUG 2023
Certificate of Compensation Payment/Tax Withheld

What to issue? BIR Form 2316 ( July 2018 Version)

Who to issue? Employer
When to issue?  On or before January 31 of the succeeding
calendar year; or
 On the day of last payment of compensation if
terminated
Number of copies: Three (3) copies
Signed by: Both employer and employee
(under the penalty of perjury)

Note: An extra copy shall be furnished by the employer duly certified by him to his NEW
employer in case of transfer of employment within the taxable year.

44
eVer. 2.1 AUG 2023
 Certificate of Compensation Payment/ Tax Withheld
(BIR Form No. 2316)

 This certificate shall include a certification that the employer’s filing of

BIR Form No. 1604-C shall be considered a substituted filing of the
employee’s income tax return.
 It shall be signed by both the employees and employer attesting the
information stated therein has been verified and is true and correct to
the best of their knowledge.

NOTE: However, the withholding agents/employers are required to retain

copies of the duly signed BIR Form No. 2316 for a period of three (3) years
as required under the NIRC.

45
eVer. 2.1 AUG 2023
 Certificate of Compensation Payment/ Tax Withheld
(BIR Form No. 2316)

 Information referring to the certification, appearing at the bottom of

BIR Form No. 2316, shall not be signed by both the employer and the
employee if the latter is not qualified for substituted filing.

 BIR Form No. 2316 furnished by the employer to the employee shall be
attached to the employee’s Income Tax Return (BIR Form No. 1700) to
be filed on or before April 15 of the following year.

46
eVer. 2.1 AUG 2023
 What to do with BIR Form No. 2316
“Issued by Employer”

If the BIR Form No. 2316 was issued by a previous employer as a

result of termination of employment and the employee has been
subsequently employed within the same calendar year, the
employee should submit a copy of BIR Form No. 2316 issued by
the previous employer to his present employer, for consolidation
with his current compensation received from the present
employer.

47
eVer. 2.1 AUG 2023
 What to do with BIR Form No. 2316
“Issued by Employer”

 If the employee is qualified for substituted filing, a copy of BIR

Form No. 2316 signed both by the employer and employee shall be
retained and kept by the employer and the employee.
 If an employee is not qualified for substituted filing, he is required
by law to file his Income Tax Return (BIR Form No. 1700 or BIR
Form No. 1701) and BIR Form No. 2316 should be attached as proof
of his compensation income and withholding taxes.

48
eVer. 2.1 AUG 2023