WITHHOLDING TAXES &

RELATED ISSUANCES
ATTY. LANOEL S. LAJA
Legal Basis
 RA 8424 CTRP January 1, 1998
 RA 9337, RA 9504
RR 2-98, RR 10-2008, RMC 27-2011
 RA 10963,RR 8-2018, RR 11-2018
Withholding Taxes

 Basic Concept :
A method of collecting the income tax at source upon
receipt of income.

Kinds of Withholding Taxes

 Withholding Taxes on Compensation
 Expanded Withholding Tax(1% goods in general, 2%
Services in general, specific rate (rental 5%, Prof. Fee
10%/15%, 5%/10%)
 Final Withholding Tax
(e.g. Government Money Payment)
Withholding Taxes on Compensation

 Basic Concept :
Employer shall be responsible for the withholding and
remittance of the correct amount of tax by deducting
and withholding from the compensation income of his
employees. If the employer fails to withhold and remit
the correct amount of tax, such tax shall be collected
from the employer together with the penalties or
additions to the tax otherwise applicable
Compensation Income Defined
 In general, the term compensation means all
remuneration for services performed by an
employee for his employer under an employer-
employee relationship, unless specifically
excluded by the code.
 Remuneration for services constitutes
compensation even if the relationship of employer
and employee does not exist any more at the time
when payment is made between the person in
whose employ the services had been performed
and the individual who performed them
EXEMPTIONS/EXCLUSIONS
 Baseline Exemption P250,000.00
 De Minimis Benefits
 a. Monetized unused vacation leave credits
of private employees not exceeding 10 days
 b. Monetized value of vacation and sick leave
credits paid to government officials and
employees
 c. Medical cash allowance to dependent of
employees not exceeding P 1,500/sem of
P250/month
EXCLUSION
 De Minimis Benefits
 d. Rice subsidy of P 2,000.00 or one sack
50kg per month amounting to not more than
P 2,000.00
 e. Uniform and clothing allowance not
exceeding P6,000.00 per annum.
 f. Laundry allowance amounting to not more
than P 300.00 /month
EXCLUSION
 De Minimis Benefits
 g. Employee achievement award in the form
of tangible personal property other than cash
or gift certificate with annual monetary value
not exceeding P 10,000.00 under a
established written plan, which does not
discriminate highly paid employees
 h. Christmas gift not exceeding P 5,000.00
per annum
 i. Daily meal allowance for overtime work and
nightshift not exceeding 25% of basic
minimum wage
EXCLUSIONS
 De Minimis Benefits
 j. Benefits received by an employee by virtue
of a CBA and productivity incentive scheme
provided the total annual benefit does not
exceed P 10,000.00
13th month pay equivalent to the mandatory 1
month basic salary
Other benefits such as Christmas bonus,
productivity incentives, loyalty award, gift in
cash or in kind including ACA (P 90,000.00)
Computing the Tax Due
Basic Compensation Income xxx
Taxable 13th Month &
other Benefits(in excess of P 90,000.00)
xxx
Total Compensation Income xxx
Less: GSIS/SSS/ Philhealth /Union Dues xxx
Net Taxable xxx

Compensation Income Subject to Tax xxx

Tax Due (Sect 24 a NIRC) xxx
Tax Withheld xxx
Tax still due xxx
 Tax Table Compensation earned
2018-2022
OVER NOT OVER Basic Additional EXCESS
Amount rate OVER
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

 Individuals not required to file ITR
 Individuals receiving purely compensation income whose taxable
income does not exceed P 250,000.00
 An individual whose income tax has been correctly withheld by his
employer, provided such individual has only one employer during
the year.
 Individual whose sole income has been subjected to FWT
 Minimum Wage Earner
 Substituted Filing
 Individuals receiving purely compensation income, regardless of
amount, from only one employer in the Phils. For the CY, the
income tax of which has been correctly w/held by employer
 The following are not qualified for substituted filing
a. Multiple/Successive employment
b. Employees whether single or several employers during the CY, the
income of which has not been correctly withheld.
c. Individuals deriving other non- business, non- profession related
income in addition to compensation income not otherwise subject to
final tax
d. Individuals receiving purely compensation income from a single
employer, although the income tax of which has been correctly
withheld, but whose spouse falls under enumerations (a) (b) (c)
above
e. Non – Resident alien Engaged in trade or business in the Phil.
Deriving purely compensation income & other non-business, non-
profession related income.
Illustration 1

Mr. Bembem receives P 120,000.00 as monthly

regular compensation(net of gsis,phic, hdmf
employee share) starting Jan. 1,2018. on June
1,2018, he filed his resignation effective June 30,
2018. He was unemployed for the rest of the
year. The tax withheld from January1 to May 31,
2018 was P 134,164.50. Compute for Tax
Due/Refund.
 Computation
Regular Compensation
Jan-May 2018 P 600,000.00
June 2018 120,000.00
Total Taxable Compensation 720,000.00

Tax Due
On P 400,000.00 P 30,000.00
Excess 320,000 @25% 80,000.00
Total tax due 110,000.00
Less: Tax w/held 134,164.50
Tax Refund (24,164.50)
Illustration 2
Mr. Joey receives P 120,000.00 as monthly regular
compensation(net of gsis,phic, hdmf employee
share) starting Jan. 1,2018 from CCF Corp. on
June 1,2018, he filed his resignation effective
June 30, 2018. He was subsequently re-
employed in EBQ Company with monthly
compensation of P 130,000.00. He furnished his
new employer with the BIR 2316 from his old
employer showing he received P 720,000.00
with tax w/held P 134,164.50. On December 15,
2018 he received Commission of P 15,000.00
from his new employer. His new employer
w/held P 178,997.40 from his income. Compute
Computations

Total Compensation Received from previous employer P 720,000.00

Add: Regular Compensation(New Employer) 780,000.00
Total 1,500,000.00
Add: Supplemental Income (Commission) 15,000.00
Total Taxable Compensation Income 1,515,000.00
Tax Due
On 800,000 130,000.00
On Excess (30’%) 214,500.00
Total Tax Due 344,500.00
Less: Tax Withheld (134,164.50 +178,997.40) 313,161.90
Tax Due in December 2018 31,338.10
Illustration 3
Ms. Grace received the following compensation for
the year:

Monthly Basic Salary P 50,000.00

Overtime Pay November 10,000.00

13th Month Pay 50,000.00

Other Benefits 10,000.00

Withholding Tax (Jan-Nov) 73,334.25

Computations
Basic Salary P 600,000.00
Overtime Pay 10,000.00
13TH Month 50,000.00
Other Benefits 10,000.00
Taxable 13TH Month & Other Benefits -
Total Taxable Income 610,000.00

Tax Due
On 400,000 30,000.00
On Excess (25’%) 52,500.00
Total Tax Due 82,500.00
Less: Tax Withheld Tax 73,334.25
Due in December 2018 9,165.75
Income Payment Subject to CWT
 Professional Fees, Talent fees, etc. for
services rendered
Individual Payee:
If gross Income for current year did not
exceed 3M 5%
If more than 3M 10%
Non-individual
did not exceed 720,000 10%
exceed 720,000.00 15%
Section 2.57.3
The obligation to withhold is imposed upon the
buyer-payor of income although the burden of
tax is really upon the seller-income
earner/payee; hence, unjustifiable refusal of the
latter to be subjected to withholding shall be a
ground for the mandatory audit of all internal
revenue tax liabilities,as well as the imposition
of penalties pursuant to Section 275 of the tax
code as amended, upon verified complaint of
buyer-payor.
 End Notes
Thank you ……..have a nice day….