Taxation

PREPARED BY: REIZEL JANE PASCUA

 Learning Objective
• Distinguish taxable from
nontaxable benefits; and
• Enumerate the standard deductions
with the corresponding
computation.
 Wage
• A fixed regular payment, typically paid
on daily or weekly basis, made by an
employer to an employee.
• It is the part of total production that is
the return of labor as earned income, as
distinct from the remuneration received
by capital as unearned income.
 Income
• Money earned by working or
through investments.
• It is a money that an individual
receives in exchange for providing a
good/service or through investing
capital.
 Benefits
• A payment or gift made by an
employer, the state, or an insurance
company.
• It is an employee compensation
given by an employer on top of the
basic salary/wage.
 Benefits
• Note that benefits may come in the
form of cash or in kind.
1. Cash Benefits: 13th month pay,
bonuses, rice subsidy, transportation
allowance;
2. Non-cash benefits: SSS/GSIS, Pag-
ibig, PhilHealth
 Benefits
• Presidential Decree No. 442, also
known as the Labor Code of the
Philippines, provide a list of benefits
for wage earner.
 The Benefits of the Wage
Earner
• Long – term benefits: retirement,
death, disability
• Minimum wage earner tax exemption
• Bonuses and allowances: travel, rice,
meal clothing, and laundry
 The Benefits of the Wage
Earner
• 13th month pay, holiday pay, special
pay, overtime pay, night shift
differential, and hazard pay.
• Leave incentives: sick, maternity,
paternity, solo parents, and others.
• Health – related benefits and insurance
 Retirement
• This benefits is like a savings
account.
 Minimum Wage Tax
Exemption (RA 9504)
• If the employee’s salary is the
minimum set by the Department of
Labor and Employment for each
particular region in the country, then
the employee is entitled of the
exemption.
 Maternity/Paternity Benefit
• This benefit can only be availed by a
female or male employee when the
female employee will deliver a child,
and for cases the male is needed, the
male can apply for a leave as
provided in the Paternity Leave Act of
1996 (RA 8187).
 Bonuses/Allowances
• Travel, rice, meal, clothing, etc.
• These are some amounts given by
the company to their employees for
them to enjoy.
Computation of Benefits
 Retirement Benefit
• The minimum retirement pay is
given by:
• R = retirement pay
• P = daily rate
• T = number of years served
 Retirement Benefit

•  
 13 Month Pay
th

•  
•Let x be the annual basic salary of an
employee. The 13th month pay of this
employee must be of x.
 Maternity Benefit
• Let x be the annual basic salary of an
employee. Then 2.6x and 2x for
caesarean and normal delivery,
respectively.
 Holiday Pay
• It refers to the payment of the
regular daily wage for any non-
working regular holiday
• Note that if an employee worked on
a holiday, then he will receive twice
his daily wage.
 Example
• Mr. Larry served ABC Company for
22 years with an average daily rate
of ₱467.35. he plans to retire and
avail his retirement benefit. How
much is the minimum retirement pay
that he will receive?
 Example
• Mr. Torres plans to retire and utilize
his retirement benefit. How much is
the minimum retirement pay that he
will receive for serving the company
in 15 years with an average daily
rate of ₱481.23?
 Example
• Mr. Buenaventure receives an annual
salary of ₱240,000. At the end of the
year, what would be his 13th month
pay?
 Example
• Mr. Reyes daily rate is ₱765, and is
given a sick leave of 30 working
days. Suppose the sick leave benefit
is convertible to cash and he has
incurred 7 absences only (all due to
sickness). How much will he get?
 Example
• The total allowances of Company
Magand give to their employees is
exactly 15% of their salary. Mr. Pogie’s
salary this month is ₱27,345.56, where
his allowances are meal and clothing.
If his clothing allowance is fixed at
₱2,500, then what is his meal
allowance of the month?
PREPARED BY: REIZEL JANE PASCUA