Presentation on theme: "WELCOME TO THE WITHHOLDING TAX SYSTEM The withholding tax system The withholding of tax is a system used to collect tax in advance. Withholding tax is."— Presentation transcript:
WELCOME TO THE WITHHOLDING TAX SYSTEM
The withholding tax system The withholding of tax is a system used to collect tax in advance. Withholding tax is not an internal revenue tax. The system is used to equal or at least approximate or collect in full the tax due from the payee on certain income payments. The taxes deducted and withheld by the withholding agent shall be held as a special trust fund in trust for the government until paid or remitted by the withholding agent to collection officers/banks [Section 58(A), Tax Code].
Importance of the withholding tax system BIR experiences proved that the withholding tax system is an effective tool in the collection of taxes. It is important for the following reasons: It encourages voluntary compliance; It reduces cost of production effort; It prevents delinquencies and revenue loss; and It prevents dry spells in the fiscal condition of the government by providing revenues throughout the taxable year.
Types of withholding taxes Withholding Tax on Compensation; Withholding Tax at Source or Expanded Withholding Tax; Final Withholding Tax or simply known as Final Tax; and Withholding Tax on Government Money Payment - to NON-VAT registered payees subject to percentage tax - to VAT-registered payees
Kinds of withholding taxes 1. Creditable withholding tax – Under this kind of withholding tax, taxes withheld on certain income payments are intended to equal or at least approximate the tax due of the payee on said income payments. The income recipient is still required to file income tax return or business tax return to report the income and/or pay the difference between the tax withheld and the tax due on the income. Taxes withheld on transactions subject to expanded withholding tax (EWT), withholding tax on compensation (WTC) and government Money Payment to Non-VAT taxpayers (GMP) subject to percentage tax are creditable in nature. 2. Non-creditable or final withholding tax – Under this kind of withholding tax, the amount of tax withheld by the withholding agent is constituted as a full and final payment of the tax due from the payee on the said income. The liability for payment/remittance of the tax withheld rests primarily on the payor as the withholding agent.
WITHHOLDING TAX ON COMPENSATION Requirement: There must be an employer-employee relationship as defined under Section of Revenue Regulations No (RR 2-98). Note: Minimum wage earners are no longer subject to income tax including their statutory minimum wage, overtime pay, holiday pay, hazard pay and night shift differential pay pursuant to RA 9504 as implemented by RR
For a taxable income earner: The following should be considered in the computation of withholding tax per payroll period: Gross compensation income – all remuneration for services performed by an employee for his employer under an employer-employee relationship -Non-taxable items of the gross compensation income: Exclusions from gross income [Section 32(B), Tax Code] Allowable deductions [Section 34(M), Tax Code] Personal (P50,000) and additional exemptions (P25,000) per qualified dependent child not exceeding four (4) Payroll period Withholding tax table per payroll period
GROSS COMPENSATION INCOME All remuneration for services performed by an employee for his employer, including the cash value of all remuneration paid in any medium other than cash. [Section 78(A), Tax Code]
EXCLUSIONS FROM GROSS INCOME 13TH Month pay and other BENEFITS up to P30, for the TAXABLE YEAR. [see RA 6686 and PD 851, as amended by Memorandum Order No ; Section 32(B)(7)(e), Tax Code] GSIS, SSS, MEDICARE, PAG-IBIG Contributions and Union Dues of individuals [Section32(B)(7)(f), Tax Code]
ALLOWABLE DEDUCTIONS FROM GROSS INCOME PREMIUM PAYMENTS ON HEALTH AND/OR HOSPITALIZATION INSURANCE Provided that: Gross Income per family is not more than P250, for the taxable year. Only the spouse, in case of married individuals claiming the additional exemption for dependent children shall be entitled. It shall be taken at the year-end-adjustment with substantiation (employee submits policy contract, receipts, etc.)
ALLOWABLE EXEMPTIONS PERSONAL EXEMPTIONS allowed for individuals: P50, ( 50% beginning July 6, 2008 / 100% beginning 2009 ) (pursuant to RA 9504 as implemented by RR ) ADDITIONAL EXEMPTIONS for each qualified dependent child not exceeding four (4) - P25,000.00
WHO IS A QUALIFIED DEPENDENT CHILD? Legitimate, illegitimate or legally adopted child chiefly dependent upon & living with the taxpayer, not more than 21 years old and not gainfully employed A dependent child, although above 21 years old may still be qualified as a dependent if such child is incapable of self-support because he/she is mentally or physically challenged. Medical certificate is required.
EXEMPTION CERTIFICATES Important documents: Important documents: BIR FORM 1902 (TRU Form) to be submitted by employee to employer within ten (10) days upon commencement of employment. BIR FORM to be submitted by employee to employer within ten (10) days after the change of exemption unit. The employer is required to submit the documents to the BIR within thirty (30) days after receipt of aforesaid documents from the employees WAIVER - The wife (if working) may claim the additional exemption for the qualified dependent children upon husband’s execution of waiver.
DE MINIMIS BENEFITS (Latest amendment is RR ) Monetized unused VACATION LEAVE credits of private employees not exceeding 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 P per employee per semester or P125.00/month; Rice subsidy - P1, or one sack of 50 kg. rice/month amounting to not more than P1,500.00; Uniform & clothing allowance - Not exceeding P4, per annum ; Actual medical assistance, e.g. medical allowance to cover medical and healthcare needs, annual medical/executive check-up, maternity assistance and routing consultations, not exceeding P10, per year
DE MINIMIS BENEFITS Laundry allowance- not exceeding P300.00/month Employees achievement awards – for length of service or safety achievement which must be in the form of a personal tangible property other cash or gift certificate with an annual monetary value not exceeding P10, received by the employee under an established written plan which does not indiscriminate in favor of highly paid employees; Gifts given during Christmas & anniversary celebrations - not exceeding P5, per employee per annum ( Flowers, fruits, books or similar items given to employees under special circumstances – revoked) Daily meal allowance for overtime work and night/grave- yard shift not exceeding 25% of the basic minimum wage on a per region basis.
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.
OTHER INFORMATION PAYROLL PERIOD - period of services for which payment of compensation is ordinarily made to an employee by his employer. [Section , RR 2-98] Daily, weekly, semi-monthly, monthly, etc. WITHHOLDING TAX TABLE Daily, weekly, semi-monthly & monthly
OTHER INFORMATION OTHER INFORMATION Requirement of withholding: Every employer must withhold from compensation paid an amount computed using the withholding tax table. The statutory minimum wage, holiday pay, overtime pay, hazard pay and night shift differential pay received by minimum wage earners (MWEs) shall not be subject to income tax and withholding tax. [Section 2.79(A), RR ]
RETIREMENT PAY Generally TAXABLE -EXEMPT if the following requirements are met by employers in the private sector: a. There must be a reasonable retirement benefit plan duly approved by the BIR; b. The retiring official or employee has been in the service of the same employer for at least ten (10) years and not less than fifty (50) years of age at the time of retirement; and c. The retiring official or employee should not have previously availed of the privilege under the retirement benefit plan of the same or another employer. OR d. If the retirement qualifies under RA 7641 (for employers without retirement benefit plan)
SEPARATION PAY Any amount received by an official, employee or by his heirs from the employer due to death, sickness or other physical disability or for any cause beyond the control of the said official or employee is NOT TAXABLE [Section 32(B)(6)(b) of the Tax Code] (Please refer also to RMO and RMO ) Any amount received by the employee on account of dismissal is taxable [Section (B)(b), RR 2-98
22 Annualized Withholding Tax (Year-End-Adjustment) PURPOSE PURPOSE: TAX DUE = TAX WITHHELD WHEN : On or before the end of the calendar year but prior to the payment of compensation for the last payroll period. If terminated, on the day on which the last payment of compensation is made.
23 Annualized Withholding Tax or the Year-End-Adjustment Section 79(H), Tax Code, Section 2.79(B)(5)(b), RR 2-98, as amended by RR STEP 1 - Determine the taxable regular and Supplementary compensation paid to the employee for the entire calendar year; STEP 2 - If the employee has previous employment/s within the year, add the amount of taxable regular and supplementary compensation paid to the employee by the previous employer;
24 Annualized Withholding Tax (Year-End-Adjustment) STEP 3 - Deduct from the aggregate amount of compensation computed in Step 2 the amount of the total personal and additional exemptions of the employee; Personal Exemptions: - P50, Additional Exemption: P 25,000 for each qualified dependent child not exceeding four (4)
25 Annualized Withholding Tax (Year-End-Adjustment) STEP 4 - Deduct the amount of premium payments on Health and or Hospitalization Insurance of employees who have presented evidence that they paid the same during the taxable year. NOTE: The deductible amount shall not exceed P 2,400/ annum or P 200/month whichever is lower and the total family gross income does not exceed P 250,000 for the calendar year. The employee is required to furnish employer with copies of policy contract and proof of payments before the employer does the year-end adjustment.
26 Annualized Withholding Tax (Year-End-Adjustment) STEP 5 - Compute the amount of tax on the difference arrived at in Step 4. Not over P10,0005% over P10,000 but not over P30,000P % of the excess over P10,000 over P30,000 but not over P70,000P2, % of the excess over P30,000 over P70,000 but not over P140,000P8, % of the excess over P70,000 over P140,000 but not over P250,000P22, % of the excess over P140,000 over P250,000 but not over P500,000P50, % of the excess over P250,000 over P500,000P125, % of the excess over P500,000
27 Annualized Withholding Tax (Year-End-Adjustment) STEP 6 - Determine the deficiency or excess, if any, of the tax computed in Step 5 over the cumulative tax already deducted and withheld since the beginning of the current calendar year.
28 GROSS COMPENSATION INCOME (previous + present employer)P x x x LESS: Non-Taxable Items a. 13th month pay, Christmas bonus loyalty Award, gift in cash/kind and other benefits [Sec (b)(11), RR 2-98]P 30, b. SSS, GSIS, Medicare, Pag-ibig and union dues of individual employees x x x x x c. 10 days monetized vacation leave x x x x x d. Other non-taxable compensation income x x x x x x x x x GROSS TAXABLE COMPENSATION INCOME P x x x Less: Total Exemptions P x x x Premium paid on Health or Hospitalization Insurance (Maximum of P2,400.00) x x x x x x Taxable Compensation Income P x x x Tax Due: Refer to Annualized Tax Table, Section 24(A), Tax Code P x x x Less: Tax Withheld (Jan. to November, from previous & present employer) x x x Amount to be withheld in December/refunded on Jan. 25 ff year P x x x Year-End Adjustment - Formula
29 Annualized Withholding Tax or the Year-end Adjustment RESULTS OF THE YEAR-END ADJUSTMENT: COLLECTIBLE: Tax Due > Tax Withheld ----collect before payment of last wage/compensation REFUNDABLE: Tax Due < Tax Withheld refund on or before Jan. 25th of the ff. year/last payment of wages BREAK-EVEN: Tax Due = Tax Withheld do not withhold from December salary
30 Sample Problem 1 Mr. Dexter, single receives P 25,000 (net of SSS, Philhealth, HDMF and other non- taxable items of gross income) as monthly regular compensation starting January 1, 2009, he filed his resignation effective June 30, The tax withheld from January to May was P15,000.00
31 Sample Problem 1 Computation: Total compensation received from January 1 to May 31, 2009P 125, Add: Compensation to be received on June 25, Gross Compensation Jan. – June, 2009P150, Less: Personal Exemption 50, Taxable CompensationP 100, Tax Due * P 14, Less: Tax Withheld from Jan. to May 15, Excess tax withheld to be refunded by employer P on or before June 30, 2009 of the current year * Tax Due on P70, P 8, Tax on excess (P30,000 x 20%) 6, Tax on P23,000 P 14,500.00
32 Sample Problem 2 Ms. Allister, married with 2 qualified dependent children (with husband’s waiver) receives P25,000 monthly compensation (net of SSS, Philhealth, HDMF contributions) in 2009 while tax withheld was P35, Total Compensation Jan. - Nov. (P25,000 x 11 mos.)P 275, Add: Compensation to be received in Dec. 25, Gross Compensation IncomeP 300, Less: Personal Exemption - Married P 50,000 Additional Exemptions - 2 x P25,000 50,000P100, Taxable Compensation IncomeP200, Tax Due*P 37, Less Tax Withheld from Jan. to Nov. 35, To be withheld from employee’s December salaryP 2, Tax on P140, P22, Tax on excess (P60, x 25%) 15, *TAX DUE P37,500.00
33 Employers are REQUIRED to file Annual Information Return (BIR Form 1604CF) and the Alphabetical List of Employees FOR NON-EFPS FILERS : 1. Manual Submission - 3 copies of BIR Form 1604-CF and the alphabetical list of employees. 2. Diskette Submission - Employers with ten (10) or more employees are required to submit 3.5- inch diskette. FOR EFPS FILERS : Submit through e-submission or any other required e-filing systems
34 Employers are required to submit the ANNUAL INFORMATION RETURN OF INCOME TAXES WITHHELD ON COMPENSATION AND FINAL WITHHOLDING TAXES (BIR Form No CF) and the ALPHABETICAL LIST OF EMPLOYEES WHEN :On or before January 31of the following year - WHERE:RDO, LTDO, LTS RETE NTION:3 years in a secondary storage (diskette)
35 Substituted Filing of Income Tax Return (BIR Form No. 1700) A scheme where the employee shall no longer be required to file ITR and in lieu thereof, the employer’s filing of the Annual Information Return and issuance of BIR Form No shall be sufficient provided that conditions set forth in applicable Revenue Regulations and other issuances on the matter are complied with by both the employer and employee.
36 Individuals Qualified for Substituted Filing and are not required to file BIR Form No Individuals Qualified for Substituted Filing and are not required to file BIR Form No (RRs , , , RMC ) (RRs , , , RMC ) 1. Receiving purely compensation income regardless of amount; 2. Working for one employer in the Philippines for the calendar year; 3. Income tax has been withheld correctly by the employer (TAX DUE = TAX WITHHELD) 4. The employee’s spouse also complies with all the three conditions stated above, and 5.Employer file the Annual Information Return of Income Taxes Withheld on Compensation and Final Withholding Taxes (BIR Form 1604-CF).
37 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 1604-CF) filed by their respective employers duly stamped “Received”, shall be tantamount to the substituted filing of income tax returns by said employees.
38 Individuals NOT qualified for substituted filing and MUST file BIR Form no Individuals with two or more employers concurrently and successively at anytime during the taxable year. 2. Employees whose income tax has not been withheld correctly resulting to collectible or refundable return. 3. Employees whose monthly gross income does not exceed P5,000 or the statutory minimum wage, whichever is higher, and opted for non-withholding of tax on said income. - DELETED BY RR
39 Individuals NOT qualified for substituted filing and MUST file BIR Form no Individuals deriving other non-business, non-profession- related income in addition to compensation income not otherwise subject to a final tax. 5. Individuals receiving purely compensation income from a single employer whose income tax has been correctly withheld but whose spouse does not qualify for substituted filing. 6. 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.
40 Individuals NOT qualified for substituted filing and MUST file BIR Form no NOTE: In case of married individuals who are still required to file returns, only ONE RETURN FOR THE TAXABLE YEAR SHALL BE FILED by either of the spouses to cover income of both. It shall be SIGNED BY BOTH HUSBAND AND WIFE unless physically impossible to do so, in which case, signature of one of the spouses would be sufficient
41 Certificate of Income and Tax Withheld on Compensation (BIR Form No. 2316) Who shall issue:Employer When to issue:a) on or before January 31 of the following calendar year; or b) on the day of last payment of compensation, if there is termination Number of copies: Three (3) copies Signed by::Both employer and employee (under the penalty of perjury)
42 Certificate of Income and Withheld on Compensation (BIR Form 2316) In case of successive employment: The employee is required to furnish his new employer with his duly certified copy of the Certificate issued by the previous employer, both within the taxable year.
Uses of BIR Form No Proof of financial capacity for purposes of loan, credit card, or other applications; 2. Proof of payment of tax or for availing tax credit in the employee’s home country; 3. Securing travel exemption, when necessary; and 4. Other purposes with various government agencies.
44 JERRY N. BENANING Withholding Tax Division Telephone Numbers: / Telefax:
Ano ther type of creditable withholding tax is the CREDITABLE WITHHOLDING TAX AT SOURCE or commonly known as EXPANDED WITHHOLDING TAX. Again, under the expanded withholding tax system, taxes withheld on certain income payments are intended to equal or at least approximate the tax due of the payee on said income. The income recipient is still required to file income tax returns, report or declare the income and pay the difference between the tax withheld and the tax due, as the case may be, on said income.
WITHHOLDING TAX AT SOURCE OR EXPANDED WITHHOLDING TAX (EWT)
EXPANDED WITHHOLDING TAX A.STATUTORY BASES - Sec , R.A as implemented by RR Nos. 2-98, , , , , , , , , , , ; ; ; B. RATES - 1% to 32% C. TIME OF WITHHOLDING - When paid or when recognized as a payable in the book of accounts of the payor, whichever comes first. (RR )
EXPANDED WITHHOLDING TAX D. FILING AND REMITTANCE - [with MAP, RR )] For regular withholding agents, filing and remittance of return shall be on or before the 10th day of the following month after withholding was made for the months of January to November. On or before January 15 of the following year for the month of December. [with MAP (RR ) For EFPS filers, filing of return shall be governed by the provisions of RR (grouping by industry) while remittance shall be additional five (5) days from that of regular withholding agents. Remittance returns are BIR Form No E and BIR Form No (for real property transactions subject to EWT)
EXPANDED WITHHOLDING TAX E. CERTIFICATES - BIR Form No Certificate of Creditable Tax Withheld at Source is issued by the WA to payee within 20 days after close of quarter or upon request/demand. However, for individual payees, upon request for the 1st calendar quarter. F. ANNUAL RETURN - Withholding Agent shall file the Annual Information Return (BIR Form No E) on or before March 1 of the following year together with the Alphabetical List of payees in hard copy, in diskette, thru e-submission or other mode of submission.
WITHHOLDING TAX AT SOURCE G. NATURE OF TAX WITHHELD - Creditable against the quarterly or annual income tax due. H. TAX BASE – Gross amount paid excluding VAT for VAT taxpayers. I. INCOME PAYMENTS SUBJECT TO EWT:
INCOME PAYMENT - EWT A.Professional/Talent Fees for services rendered by individuals – 15% if the gross income for the current year exceeds P720, and 10% if otherwise. (RR 2-98,/6-2001/ / ) 1. Individually engaged in the practice of profession (Lawyers, CPAs, Engineers, etc.) 2. Professional Entertainers, etc. 3. Professional athletes 4. Directors and producers involved in movies, stage, TV & Musical production; 5. Insurance agents and Insurance Adjusters 6. Management & Technical Consultants
INCOME PAYMENT - EWT 7. Bookeeping agents and agencies 8. Other recipients of talent fees 9. Fees of directors who are not employees of the payor corporation the duties of which are confined to attendance in the meetings of the Board of Directors NOTE : In order to determine the rate of EWT to be used, payees are required to file with the Collection Division of the BIR regional office having jurisdiction over the place of business of the taxpayer the duly notarized Sworn Declaration of Income for the current year.
INCOME PAYMENT - EWT B. Professional/Talent Fees Paid to Juridical Persons - 15% or 10% (RR 2-98/6-2001/ ) C. Rentals of: 1. Real Property (RR 2-98/6-2001) -5% 2. Personal Property (RR / ) -5% D. Cinematographic film rentals and other payments (RR 2-98/^-2001) -5% E.Income payments to contractors -2% (RR 2-98/6-2001/ / ) (General Building, Engineering, Specialty & Other Contractors)
INCOME PAYMENT F. Income distribution to beneficiaries of estates and trusts under Section 60 of the Tax Code, except such income is subject to final tax and tax exempt income (RR 2-98/6-2001) % G. Income payments to certain brokers and agents (Customs, insurance, stock, real state, immigration and commercial brokers and fees of agents of professional entertainers (RR 2-98/6-2001/ / ) % H.Income payments to partners of General Professional Partnership (GPP ) (RR 2-98/6-2001/ ) – 15% or 10%
INCOME PAYMENT – EWT I.Professional fees paid to medical practitioners by patients admitted and confined to hospitals or clinics (RR 2-98/12-98/3-99/ / / ) – 15% or 10% J.Payment for the sale, exchange or transfer of real property classified as ordinary asset if seller is habitually engaged in the real estate business (RR 2-98/ / ) - Exempt transaction - 0% - Selling price is not over P500, % - SP is over P500,000 but not over P2M - 3% - Selling price is over P2 M - 5% - Seller is not habitually engaged in REB - 6%
INCOME PAYMENT K.Additional income payments to government personnel from importers, shipping, airline companies or their agents (RR 2-98/6-2001) – 15% L.Certain payments made by credit card companies – (RR 2-98/6-2001) 1% of ½ of gross payment M.Income payments made by the top 20,000 private corporations (RRs 12-94, , , ). With conditions on agricultural products per Section 2, RR ) Goods-1% Services- 2%
INCOME PAYMENT N.Income payments by government (RR 2-98/6-2001/ / / ) Goods-1% Services - 2% O.Commission of independent and exclusive distributors, medical, technical and sales representatives and marketing agents of multi-level marketing companies (RR 2-98/ ) - 10% P.Tolling fees paid to refineries (RR ) - 5% Q. Payments made by pre-need companies to funeral parlors (RR ) - 1%
INCOME PAYMENT - EWT R.Payments of funeral parlors to embalmers (RR ) - 1% S.Income payments made to suppliers of agricultural products [applies only to top corporations, government offices and top 5000 individual taxpayers (with conditions) (RR / /1-2004/3-2004/6-2009) --1% T.Income payments on purchases of minerals, mineral products and quarry resources as defined and discussed in Section 151 of the Tax Code (RR /7-2008) – 10%
INCOME PAYMENT – EWT U.Meralco refund to customers arising from Supreme Court decision under SC case GR dated April 9, 2003 as approved by ERC: (RR /2-2009) - With active contracts - 25% - With terminated contracts - 32% V.Interest income on the refund of electric meter deposits by Meralco and other electric Distribution Utilities: (RR )
INCOME PAYMENT – EWT 1. Residential and General Service customers whose monthly electric consumption exceeds 200kwh as classified by the concerned DU - 10% 2. Non-residential, etc %
INCOME PAYMENT – EWT W. Payments made by the Top 5,000 Individual TPs to their local/resident suppliers of goods and ser- vices other than those covered by other rates of withholding tax: (RR ) – Goods - 1% Services- 2% X. Payments made by political parties and candidates of local and national elections of all their purchase of goods and services as campaign expenditures and payments made by an individual or juridical persons forming part of their campaign contributions to candidates of local and national elections and to political parties – 5% (RR / )
MARAMING SALAMAT PO! JERRY N. BENANING WITHHOLDING TAX DIVISION Bureau of Internal Revenue Bureau of Internal Revenue Telephone Numbers: Telefax :
FINAL WITHHOLDING TAX Under the Final Withholding Tax System, the tax withheld by the withholding agent is constituted as a full and final payment of the income tax due from the payee on said income. The payee is not required to file an income tax return. Under the Final Withholding Tax System, the tax withheld by the withholding agent is constituted as a full and final payment of the income tax due from the payee on said income. The payee is not required to file an income tax return.
FINAL WITHHOLDING TAX The following are payments or transactions subject to final withholding tax or final tax: The following are payments or transactions subject to final withholding tax or final tax: A. Granting or payment by the employer of FRINGE BENEFITS (good, service or other benefit in cash or in kind, in addition to basic salaries) t o supervisors and managers such as: (see RR 3-98) A. Granting or payment by the employer of FRINGE BENEFITS (good, service or other benefit in cash or in kind, in addition to basic salaries) t o supervisors and managers such as: (see RR 3-98) Fringe BenefitValuation Fringe BenefitValuation 1. Housing a. Er leases residential property Value of the benefit (VB) which is the usual place of shall be the amount of a. Er leases residential property Value of the benefit (VB) which is the usual place of shall be the amount of residence of the employee rental paid by the Er (per lease residence of the employee rental paid by the Er (per lease contract). The Monetary Value contract). The Monetary Value (MV) is 50% of VB. (MV) is 50% of VB.
FINAL WITHHOLDING TAX A. FBT – Housing A. FBT – Housing Fringe BenefitValuation 1. b. Er owns residential property and Annual VB is 5% of the market 1. b. Er owns residential property and Annual VB is 5% of the market the same is assigned for the use value of land and improvement. the same is assigned for the use value of land and improvement. of his employee as his usual The MV shall be 50% of the VB. of his employee as his usual The MV shall be 50% of the VB. place of residence MV = [5%(FMV or ZV] x 50% place of residence MV = [5%(FMV or ZV] x 50% c. Er purchases residential property Annual VB is 5% of acquisition c. Er purchases residential property Annual VB is 5% of acquisition on installment basis and allows cost, exclusive of interest. MV on installment basis and allows cost, exclusive of interest. MV Ee to use the same as his usual is 50% of the VB. Ee to use the same as his usual is 50% of the VB. place of residence place of residence
FINAL WITHHOLDING TAX A. FBT – Housing A. FBT – Housing Fringe BenefitValuation 1. d. If Er purchases residential propertyMV shall be entire value 1. d. If Er purchases residential propertyMV shall be entire value and transfers ownership in the name of the benefit and transfers ownership in the name of the benefit of Ee, the VB shall be the Er’s acqui- of Ee, the VB shall be the Er’s acqui- sition cost or ZV sition cost or ZV e. If Er purchases a residential propertyVB shall be the difference e. If Er purchases a residential propertyVB shall be the difference & transfers ownership to Ee for his between the FMV or ZV & transfers ownership to Ee for his between the FMV or ZV residential use, at a price less than the and the cost to the Er. residential use, at a price less than the and the cost to the Er. Er’s acquisition cost MV shall be the entire Er’s acquisition cost MV shall be the entire value of the benefit value of the benefit
FINAL WITHHOLDING TAX A. FBT – 1. Housing – The following housing benefits shall not be considered fringe benefit subject to fringe benefits tax: A. FBT – 1. Housing – The following housing benefits shall not be considered fringe benefit subject to fringe benefits tax: 1. f. Housing privilege for uniformed personnel of AFP; 1. f. Housing privilege for uniformed personnel of AFP; g. A housing unit which is situated inside or adjacent to the premises of the business. (located within the maximum of 50 meters from the perimeter of the premises) g. A housing unit which is situated inside or adjacent to the premises of the business. (located within the maximum of 50 meters from the perimeter of the premises) h. Temporary housing for an employee who stays in a housing unit h. Temporary housing for an employee who stays in a housing unit for 3 months or less for 3 months or less
FINAL WITHHOLDING TAX A. FBT - 2. EXPENSE ACCOUNT 2.a. In general, expenses incurred by Ee but paid by Er shall be treated as taxable FB, except when the expenditures are duly receipted for and in the name of the Er and the expenditures do not partake the nature of a personal expense attributable to the employee. 2.a. In general, expenses incurred by Ee but paid by Er shall be treated as taxable FB, except when the expenditures are duly receipted for and in the name of the Er and the expenditures do not partake the nature of a personal expense attributable to the employee. b. Expenses paid for by the but reimbursed by his Er shall be treated as taxable FB except when the expenditures are duly receipted for and in the name of the ER and the expenditures do not partake the nature of a personal expense attributable to the said employee. b. Expenses paid for by the but reimbursed by his Er shall be treated as taxable FB except when the expenditures are duly receipted for and in the name of the ER and the expenditures do not partake the nature of a personal expense attributable to the said employee. c. Personal expenses of the Ee (e.g. purchase of groceries for the personal consumption of the employee and family members) paid for and reimbursed by the Er to the Ee shall be treated as taxable FB whether the same are duly receipted for on in the name of the Er, c. Personal expenses of the Ee (e.g. purchase of groceries for the personal consumption of the employee and family members) paid for and reimbursed by the Er to the Ee shall be treated as taxable FB whether the same are duly receipted for on in the name of the Er,
FINAL WITHHOLDING TAX A. FBT - 2. EXPENSE ACCOUNT 2. d. RATA which are fixed in amounts and are regularly received by Ee as part of compensation income shall not be treated as taxable FB but shall be considered taxable compensation income. [see Section (A)(6), RR 2-98, as amended by RR ] 2. d. RATA which are fixed in amounts and are regularly received by Ee as part of compensation income shall not be treated as taxable FB but shall be considered taxable compensation income. [see Section (A)(6), RR 2-98, as amended by RR ] 3. MOTOR VEHICLE 3. MOTOR VEHICLE Fringe BenefitValuation 3. a. Er purchases vehicle in the name of Ee VB is the cquisition cost. MV is the entire value of FB (regardless if it is used by Ee partly for personal purpose and partly for the benefit of Er) 3. a. Er purchases vehicle in the name of Ee VB is the cquisition cost. MV is the entire value of FB (regardless if it is used by Ee partly for personal purpose and partly for the benefit of Er)
FINAL WITHHOLDING TAX A. FBT - MOTOR VEHICLE A. FBT - MOTOR VEHICLE Fringe Benefit Valuation Fringe Benefit Valuation 3. b. Er provides Ee with cash for VB is the amount of the purchase of a motor vehicle, cash received by Ee. the ownership of which is MV is the entire placed in the name of the value of the FB (regardless Ee if it is used by Ee partly for personal purpose and partly for the benefit of Er) 3. b. Er provides Ee with cash for VB is the amount of the purchase of a motor vehicle, cash received by Ee. the ownership of which is MV is the entire placed in the name of the value of the FB (regardless Ee if it is used by Ee partly for personal purpose and partly for the benefit of Er) c. Er purchases car on installment, VB is the acquisition the ownership of which is placed cost exclusive of in the name of the Ee interest, divided by 5 years. MV of FB is the entire value of the benefit (regardless it is c. Er purchases car on installment, VB is the acquisition the ownership of which is placed cost exclusive of in the name of the Ee interest, divided by 5 years. MV of FB is the entire value of the benefit (regardless it is used by Ee partly for personal purpose and partly for Er’s benefit.
FINAL WITHHOLDING TAX A. FBT - MOTOR VEHICLE A. FBT - MOTOR VEHICLE Fringe Benefit Valuation Fringe Benefit Valuation 3. d. Er shoulders portion of the VB is the amount amount of the purchase price shouldered by Er. MV of the vehicle the ownership is the entire value of FB of which is placed in the (regardless if it is used by Ee partly for name of the Ee. personal purpose and partly for the benefit of the Er) 3. d. Er shoulders portion of the VB is the amount amount of the purchase price shouldered by Er. MV of the vehicle the ownership is the entire value of FB of which is placed in the (regardless if it is used by Ee partly for name of the Ee. personal purpose and partly for the benefit of the Er) e. Er owns & maintains a fleet VB is the acqusition cost of of motor vehicles for the use all vehicles NOT normally of the business and employees used for sales, freight, deli- very service and other non- personal use divided by 5 yrs. personal use divided by 5 yrs. MV of FB is 50% of VB or MV of FB is 50% of VB or MV = [(AC/5] x 50% MV = [(AC/5] x 50%
FINAL WITHHOLDING TAX A. FBT - MOTOR VEHICLE A. FBT - MOTOR VEHICLE Fringe Benefit Valuation Fringe Benefit Valuation 3. f. Er leases & maintains a fleet VB is the amount of of motor vehicles for the use rental payments for of the business & employees vehicles not normally used for sales, freight, delivery, service and other non-personal use. MV is 50% of VB g. Use of aircraft (including helicopters) owned and maintained by Er shall be treated as business use and NOT subject to FBT.
FINAL WITHHOLDING TAX A. FBT - MOTOR VEHICLE Fringe Benefit Valuation Fringe Benefit Valuation 3. h. Use of yacht, whether owned VB is measured based and maintained or leased by on the depreciation of the Er, shall be treated as the yacht at an estima- taxable FB. t ed life of 20 years 4. HOUSEHOLD EXPENSES Expenses of the Ee which are borned by the Er for household personnel (salaries of household help, personal driver or the Ee, or other similar expenses like payment for homeowners association dues, garbage dues, etc) shall be treated as taxable fringe benefit. Expenses of the Ee which are borned by the Er for household personnel (salaries of household help, personal driver or the Ee, or other similar expenses like payment for homeowners association dues, garbage dues, etc) shall be treated as taxable fringe benefit.
FINAL WITHHOLDING TAX A.FBT - 5. INTEREST ON LOAN AT LESS THAN MARKET VALUE 5. a. Er lends money to Er free of interest or at a rate lower than 12%, such interest foregone by the Er or the difference of the interest assumed by the Ee and the rate of 12% shall be treated as taxable FB. b. The benchmark interest rate of 12% shall remain in effect c. Applies to installment payments or loans with interest rate lower than 12% starting January 1, 1998.
FINAL WITHHOLDING TAX A. FBT - 6. MEMBERSHIP FEES, DUES, AND OTHER EXPENSES BORNE BY THE ER FOR HIS EE IN SOCIAL AND ATHLETIC CLUBS OR OTHER SIMILAR ORGANIZATIONS. The expenditures shall be treated as taxable FB of the employee in FULL.
FINAL WITHHOLDING TAX A. FBT - 7. EXPENSES FOR FOREIGN TRAVEL 7. a. Expenses for foreign travel borne by the ER for attending business meetings or conventions (as supported by documents) are NOT taxable FB. Inland travel expenses (food, beverages and local transpo) except lodging cost in a hotel (or similar establishments) amounting to an average of $ or less per day is not subject to FBT. The cost of economy and business class airplane ticket is NOT subject to FBT. However, 30% of the FIRST CLASS airplane ticket is subject to FBT. b. Documentary evidences required [Sec. 2.33(B), RR 3-98]
FINAL WITHHOLDING TAX A. FBT - 7. EXPENSES FOR FOREIGN TRAVEL 7. c. Travelling expenses which are paid by the Er for the travel of the family members of the Ee shall be treated as taxable FB of the employee. 8. HOLIDAY AND VACATION EXPENSES- Holiday and vacation expenses of the employee borne by his employer shall be treated as taxable FB.
FINAL WITHHOLDING TAX A. FBT - 9. EDUCATIONAL ASSISTANCE TO Ee OR HIS DEPENDENTS 9. a. Educational assistance which are borne by the Er is taxable FB except if the grant is directly connected with the Er’s trade, business or profession and there is a written contract that Ee shall remain in the employ of Er for a period of time they have mutually agreed upon.
FINAL WITHHOLDING TAX A. FBT - 9. EDUCATIONAL ASSISTANCE TO Ee OR HIS DEPENDENTS 9. b. The educational assistance extended by the Er to the dependents of the Ee shall be treated as taxable FB unless the assistance was provided through competitive scheme under the scholarship program of the company.
FINAL WITHHOLDING TAX A. FBT LIFE OR HEALTH NSURANCE AND OTHER NON-LIFE INSURANCE PREMIUMS OR SIMILAR AMOUNTS IN EXCESS OF WHAT THE LAW ALLOWS. The cost of life or health insurance and other non-life insurance premiums borne by the Er for his Ee is taxable FB except a) contributions of the Er for the benefit of the Ee, pursuant to the provisions of existing laws and b) cost of premiums borne by the Er for the group insurance of his Ees.
FINAL WITHHOLDING TAX Other FBs not subject to FBT: 1. FBs which are authorized and exempted from tax under the Tax Code or under any special law; 2. Contributions of Er for the benefit of the Ee to retirement, insurance and hospitalization benefit plans; 3. Benefits given to rank and file, whether granted under a CBA or not; 4. De Minimis benefits as defined under RR 3-98, as amended by RR , and ; 5. If the grant of the FBs to the employee is required by the nature of, or necessary to the trade, business or profession of the employer; or 6. If the grant of the FB is for the convenience of the Er.
FINAL WITHHOLDING TAX A. OTHER FINAL TAXES: Sec , RA 8424, Sec. 2.57, RR 2-98, RRs 10-98, , , , , , etc. 1. Payment to Individual Citizen and Resident Alien a. Interest on Phil. Currency bank deposits & yield on deposit substitutes, etc % b. Interest under the Foreign Currency Deposit System % c.Royalties % d. Royalties on books, literary works and musical arrangements % e. Prizes (except amounting to P10,000 or less) % f. Winnings (except PCSO & Lotto) %
FINAL WITHHOLDING TAX 1. Payment to Individual Citizen and Resident Alien Rate f. Interest income from pre-termination of certificate of long-term deposit: 4 years to less than 5 years % 3 years to less than 4 years % Less than 3 years % g. Cash and/or property dividends %
FINAL WITHHOLDING TAX 2. Payment to Non-resident Alien Individual: a. Engaged in trade or business within the Phils: Rate 1. Cash and/or property dividends, interest, 20% royalties, prizes (except amounting to P10,000 or less), winnings (except PCSO & Lotto) 2. Royalties on books, literary works and 10% musical compositions 3. Cinematographic films and similar work 25%
FINAL WITHHOLDING TAX 2. Payment to Non-resident Alien Individual: a. Engaged in trade or business within the Phils: 4. Interest income from pre-termination of certificate of long-term deposit: 4 years to less than 5 years % 3 years to less than 4 years % Less than 3 years % 5. Income from contracts by sub-contractors from service contractors engaged in ‘petroleum operations’ under PD % 6. Share in the distributable net income after tax of which payee is a partner or share in the net income after tax of an association where he is a member or co-venturer %
FINAL WITHHOLDING TAX 2. Payment to Non-resident Alien Individual: a. ENGAGED trade or business within the Phils: Rate 6. Income derived by alien individuals employed and occupying managerial and technical positions (see RMC ) in Regional or Area Headquarters and Regional Operating Headquarters and Representative Offices in the Phils of Multinational Companies, Offshore Banking Units and Foreign Petroleum Service Contractors and Sub-contractors 15% (The same tax treatment is applicable to Filipinos employed and occupying managerial and highly technical positions as clarified by RMC at their option)
FINAL WITHHOLDING TAX 2. Payment to Non-resident Alien Individual: a. NOT ENGAGED in trade or business within the Phils: - Cash and/or property dividends, rents, salaries, wages, premiums, annuities, compensation, remuneration, emoluments or other fixed or determinable annual or periodic or casual gains, profits and income % 3. Payment to a Domestic Corporation a. Interest on Phil. Currency bank deposits & yield on deposit substitutes, etc %
FINAL WITHHOLDING TAX 3. Payment to a Domestic Corporation a. Interest on Phil. Currency bank deposits & yield on deposit substitutes, etc % b. Interest under the Foreign Currency Deposit System % c. Royalties % d. Intercorporate dividends - not subject to tax
FINAL WITHHOLDING TAX 4. Payment to a Resident Foreign Corporation a. Interest on Phil. Currency bank deposits & yield on deposit substitutes, etc % b. Interest under the Foreign Currency Deposit System % c. Royalties % d. Dividends received from domestic corporation is not subject to tax e. Branch profit remittance % 5. Income derived by OBU and FCDU from foreign currency transactions with local commercial banks %
FINAL WITHHOLDING TAX 4. Payment to a NON-RESIDENT FOREIGN CORPORATION a. Cinematographic films and similar work % b. Vessels chartered by Philippine nationals % c. Lessor or aircraft, machineries & other eqpmt % d. Interest on foreign loans % e. Cash or property dividends received from domestic corporation* % [*with conditions under Section 28(B)(5)(b) of the Tax Code and Section (I)((1) of RR 2-98] f. Other payments to NRFC % 5. Informer’s reward [see Section 2.57(K), RR 2-98, Section 57(A) and 282, both of the Tax Code]
FINAL WITHHOLDING TAX Remittance: 1. FBT: - For regular withholding agents, due date is 10 th day of the month following end of calendar quarter. For EFPS filers, additional 5 days - Remittance return is BIR Form No (quarterly) - Venue for payment is at the AAB within the RDO where WA is registered/RCO/LTDO/LTS-NO
FINAL WITHHOLDING TAX Remittance: 2. Interest on bank deposits: - Due date is on or before the 10 th day of the following month. - Remittance return is BIR Form No Venue for payment is at the AAB within the RDO where WA is registered/RCO/LTDO/LTS- NO.
FINAL WITHHOLDING TAX Remittance: 3. Other Final Taxes - Due date is on or before the 10 th day of the following month for the months of January to November. For December, on or before January 15 of the following year - Remittance return is BIR Form No F - Venue for payment is at the AAB within the RDO where WA is registered or at the RCO/LTDO/LTS-NO
FINAL WITHHOLDING TAX Certificate issued to payee: - BIR Form No On or before January 31 of the ff. year Nature of taxes withheld: Non-creditable Annual information return: a. FBT & OFT – BIR Form No CF and alphalist of payees b. Interest on bank deposit – BIR Form No CF but no alphalist of payees
GOVERNMENT MONEY PAYMENT [Sections and 5.116, RR 2-98, RA 9337 as implemented by RR 16(2005 ) A. STATUTORY BASES: 1. For NON-VAT payees - Sec , RR No (GMP) 2. For VAT taxpayers/payees - Sec. 114(C), R.A. 8424, as amended by RA 9337; Sec , RR No. 2-98, as amended by RR (GVAT)
GOVERNMENT MONEY PAYMENT B. WITHHOLDING AGENT: - The government or any of its political subdivisions, instrumentalities, agencies, GOCC, etc. as represented by their heads of offices, treasurers and accountants (RMO ) C. TIME OF WITHHOLDING - When paid or payable D. REMITTANCE - on or before the 10th day of the following month after withholding was made using BIR Form No
GOVERNMENT MONEY PAYMENT E. ISSUANCE OF CERTIFICATE – a. For NON-VAT PAYEES - not later than 10 days after the end of the month using BIR Form No (RR ) b. VAT PAYEES - not later than 10 days after the end of each month using BIR Form No (RR , RR )
GOVERNMENT MONEY PAYMENT F. DESIGNATION OF GOVERNMENT OFFICIALS AS WITHHOLDING AGENT: The heads of office, treasurers and accountants: (RRs 1- 87, 6-96, 10-97, RMOs 14-98, 70-98, ) G. NATURE OF TAX WITHHELD a. GMP- creditable against percentage tax due b. GVAT – Non-creditable (see Section of RR )
GOVERNMENT MONEY PAYMENT TRANSACTIONS SUBJECT TO GMP (NV) TRANSACTIONS SUBJECT TO GMP (NV) Payments to: [Section 5.116(A)(1to 11)] 1. Persons exempt from VAT 3% 2. Domestic carriers and keepers of garages 3% 3. International carriers air/shipping 3% 4. Franchise grantees a. Radio and/or TV broadcasting companies whose annual gross receipts of the preceding year does not exceed P10M 3% b. Gas and water utilities (electric utilities now subject to VAT) 2%
GOVERNMENT MONEY PAYMENT TRANSACTIONS SUBJECT TO GMP (NV) TRANSACTIONS SUBJECT TO GMP (NV) 5. Banks and Non-bank Financial Intermediaries Performing Quasi-Banking Functions - (Section 121, Tax Code, as amended by RA 9337) On interest, commissions and discounts from lending activities as well as income from financial leasing on the basis of the remaining maturities of instrument from which such receipts are derived: a. Maturity period is five years or less % Maturity period is more than 5 years % b. On dividends and equity shares and net income of subsidiaries 0% c. On royalties, rentals of property, real or personal, profits from exchange and all other items treated as gross income under Section 32 of the Tax Code % d. On the net trading gains within the taxable year on foreign currency, debt securities, derivatives and other financial instruments % 6. Finance companies a. On gross receipts derived by finance companies, as well as other financial intermediaries NOT performing quasi-banking functions doing business in the Phils. from interest, discounts and other items treated as gross income - 5%
GOVERNMENT MONEY PAYMENT TRANSACTIONS SUBJECT TO GMP (NV) 6. Finance companies b. On interest, commissions and discounts from lending activities, as well as financial leasing based on the remaining maturity of the instruments from which such receipts are derived: - Short term maturity (2 years below) 5% - Medium-term (over 2 yrs but not exceeding 4 yrs) 3% - Long-term maturity: Over 4 yrs but not exceeding 7 years 1% Over 7 years 0%
GOVERNMENT MONEY PAYMENT TRANSACTIONS SUBJECT TO GMP (NV) 7. Life insurance premiums paid to persons doing life insurance business of any sort in the Philippines 5% [with conditions, Section 5.116(A)(7), RR 2-98] 8.Agents of foreign insurance companies: a. On premiums paid to every fire, marine or miscellaneous insurance agent 10% [Section 124, Tax Code/Sec (A)(8), RR 2-98] b. On premium payments obtained directly... etc. [Section 5.116(A)8(B), RR 2-98] 5%
GOVERNMENT MONEY PAYMENT TRANSACTIONS SUBJECT TO GMP (NV) 9. Amusements - On gross payments to proprietor, lessee, or operator of: a. Cockpits 18% b. Cabarets, night and day clubs 18% c. Boxing exhibitions 10% d. Professional basketball games 15% e. Jai-alai and racetracks 30% [Section 5.116(A)(9)(a to e), RR 2-98]
GOVERNMENT MONEY AYMENT TRANSACTIONS SUBJECT TO GMP (NV) Sale, barter or exchange of shares of stock listed and traded through the local stock exchange1/2 of 1% [Section 5.116(A)(10), RR 2-98] 11. Shares of stock sold or exchanged through initial public offering: [Section 5.116(A)(11), RR 2-98] - Not over 25%4% - Over 25% but nor exceeding 33 1/3%2% - Over 33 1/3%1%
GOVERNMENT MONEY PAYMENT TRANSACTIONS SUBJECT TO GVAT: B. VAT PAYEES 1. Purchase of Goods & Services 5% 2. Payment for lease or use of properties or property rights to non-resident owners12%
3.Payment for services rendered to local insurance companies with respect to reinsurance premiums payable to non- resident insurance or reinsurance companies; - 12% and 4. Services rendered in the Philippines by non-residents - 12% GOVERNMENT MONEY PAYMENT
STEP-BY-STEP PROCEDURES TO DETERMINE THE AMOUNT OF TAX TO BE WITHHELD [Section 2.79(B)(3) of Revenue Regulations (RR) No. 2-98, as last amended by RR ]
STEP 1. USE THE APPROPRIATE WITHHOLDING TAX TABLE for the payroll period; monthly, semi-monthly, weekly or daily as the case may be. WEEKLY Exemption , Status (`000P) +0% over +5% over +10% over +15% over +20% over +25% over +30% over +32% over A. Table for employees without qualified dependent 1. Z ,3462,6924,8089, S/ME ,1541,5382,3083,6545,76910,577 B. Table for employee with qualified dependent child(ren) 1. ME1 / S ,4421,6352,0192,7884,1356,25011, ME2 / S ,9232,1152,5003,2694,6156,73111, ME3 / S ,4042,5962,9813,7505,0967,21212, ME4 / S ,8853,0773,4624,2315,5777,69212,500
MONTHLY Exemption , , , Status (`000P) +0% over +5% over +10% over +15% over +20% over +25% over +30% over +32% over A. Table for employees without qualified dependent 1. Z ,5005,83311,66720,83341, S/ME ,1675,0006,66710,00015,83325,00045,833 B. Table for employee with qualified dependent child(ren) 1. ME1 / S ,2507,0838,75012,08317,91727,08347, ME2 / S ,3339,16710,83314,16720,00029,16750, ME3 / S ,41711,25012,91716,25022,08331,25052, ME4 / S ,50013,33315,00018,33324,16733,33354,167
STEP 2. DETERMINE THE TOTAL MONETARY AND NON-MONETARY COMPENSATION paid to an employee for the payroll period, segregating gross benefits which includes thirteenth (13 th ) month pay, productivity incentives, Christmas bonus, and other benefits received by the employee per payroll period. Gross benefits which are received by officials and employees of public and private entities in the amount of thirty thousand pesos (P30,000.00) or less shall be exempted from income tax and from withholding tax.
STEP 3. Segregate the taxable compensation from the non-taxable income paid to the employee for the payroll period. The taxable income refers to all remuneration paid to an employee not otherwise exempted by law from income tax and consequently from withholding tax. The non- taxable income are those which are specifically exempted from income tax under the Tax Code or by other special laws as listed in Section (B) of RR 2-98, as amended (e.g. benefits not exceeding P30,000, non-taxable retirement benefits and separation pay, “de minimis benefits” etc.).
STEP 4. SEGREGATE THE TAXABLE COMPENSATION income as determined in Step 3 into REGULAR taxable compensation income and SUPPLEMENTARY compensation income. Regular compensation includes basic salary, fixed allowances for representation, transportation and other allowances paid to an employee per payroll period which are not substantiated or liquidated. Supplementary compensation includes payments to an employee in addition to the regular compensation such as commission, overtime pay, taxable retirement pay, taxable bonus and other taxable benefits, with or without regard to a payroll period.
STEP 5. FIX THE COMPENSATION LEVEL as follows: Determine the line (horizontal) corresponding to the status and number of qualified dependent children using the appropriate symbol for the taxpayer status. Determine the column (vertical) to be used by taking into account only the total amount of taxable regular compensation income. The compensation level is the amount indicated in the line and column to which the regular compensation income is equal to or in excess, but not to exceed the amount in the next column of the same line.
STEP 6. COMPUTE THE WITHHOLDING TAX by adding the tax predetermined in the compensation level indicated at the top of the column, to the tax on the excess of the total regular and supplementary compensation over the compensation level which is computed by multiplying the excess by the rate also indicated at the top of the same column.
Sample Computations on the Use of the Withholding Tax Table
EXAMPLE 1: Mr. A, single (S) with no qualified dependent, receives compensation income of P12, (net of all non-taxable items of gross income) as regular monthly compensation for March, Compute his withholding tax for the month.
COMPUTATION: Using the monthly withholding tax table, the withholding tax is computed by referring to Table A, line 2, column 5 showing a tax of P on P10, plus 20% of the excess (P12, less P10, = P2,000.00). Taxable compensationP12, Less: Compensation level (Table A, Line 2, Column 5) 10, ExcessP 2, Tax on P10,000.00P Tax on excess (P2, x 20%) Withholding tax for March, 2009 P 1,108.33
EXAMPLE 2: Mr. B, single (S2) with two (2) qualified dependent children, receives P7, as semi-monthly regular compensation (net of non-taxable items) and P as commission (supplementary compensation) for January, 2009, or a total of P8,
COMPUTATION: Using the semi-monthly withholding tax table, the withholding tax for January, 2009 is computed by referring to Table B, Line 2, Column 5 [Fix compensation level taking into account only the regular semi-monthly compensation income of P7,500.00] which shows a tax of P plus 20% of the excess (P8, less P7, = P1,217.00). Total taxable compensationP8, Less: compensation level (Table B, Line 2, Column 5) 7, ExcessP1, Tax on P7,083.00P Tax on excess (P1, x 20%) Withholding tax for January, 2009P
EXAMPLE 3: Mrs. C, married (ME) with two (2) children receives on September, 2009, P20,00.00 as regular compensation. Mr. C, her husband, is also employed and claims for the 2 qualified dependent children (additional exemptions).
COMPUTATION: Using the monthly withholding tax table, the withholding tax due is computed by referring to Table A, Line 2, Column 6 which shows a tax of P1, on P15, plus 25% of the excess (P20, less P15, = P4,167.00). Total taxable compensation P20, Less: Compensation Level (Table A, Line 2, Column 6) 15, Excess P 4, Tax on P15, P 1, Tax on excess (P4, x 25%) 1, W/Tax for September, 2009 P 2,916.75
EXAMPLE 4: Mr. D, married, with four (4) qualified dependent children (ME4) receives P10, (net of taxable items) as regular semi-monthly compensation for the payroll period October 16 to 30, Mrs. D, his wife, is also employed. Mr. D did not waive his right in favor of his wife to claim for the additional exemptions.
COMPUTATION: Using the semi-monthly withholding tax table, the withholding tax due is computed by referring to Table B, Line 4, Column5 which shows a tax of P on P9, plus 20% in excess (P10, less P9, = P833.00). Taxable compensationP10, Less: Compensation Level (Table B, Line 4, Column 5) 9, Excess P Tax on P9, P Tax on excess (P x 20%) W/Tax for October 16-30, 2009 P
EXAMPLE 5: Mr. E, married with two (2) legitimate dependent children and one (1) legally adopted child, receives P30, (net of non-taxable items) as regular compensation for the month of March, 2010 from the Department of Agriculture where he works as a supervisor. Mrs. E, his wife is not employed and is the one taking care of the children.
COMPUTATION: Using the monthly withholding tax table, the withholding tax due is computed by referring to Table B, Line 3, Column 6 which shows a tax of P1, on P22, plus 25% of the excess (P30, less P22, = P7,917.25). Taxable compensationP30, Less: Compensation Level (Table B, Line 3, Column 6) 22, Excess P 7, Tax on P22, P 1, Tax on excess(P7, x 25%) 1, W/Tax for March,2010 P 3,854.25
EXAMPLE 6: On December, 2009, Mrs. F, married with three (3) qualified dependent children receives P20, as regular monthly salary (consisting of her basic salary of P15,000 and other items of taxable compensation income but net of SSS, Pag-ibig & Medicare and other non-taxable items) from her private employer. She also received during the month her 13 th month pay amounting to P15, plus other benefits such as productivity incentive bonus (PIB) of P10,000.00,and loyalty pay of P3, Mr. F, her husband, who works as a section chief in the Commission on Elections, waived his right to claim the additional exemption for the children and accordingly executed the required waiver on time. Compute the withholding tax of Mrs. F for the month of Dec., 2009.
Gross Benefits: 13 th month pay P15,000.00* Productivity IB 10,000.00* Loyalty pay 3,000.00* Total Gross Benefits P 28,000.00* *NOTE: Non-taxable because the 13 th month pay and other benefits does not exceed P30, COMPUTATION: Using the monthly withholding tax table, the withholding tax due is computed by referring to Table B, Line 3, Column 5 which shows a tax of P on P16, plus 20% of the excess (P20, less P16, = P3,750.00). Taxable compensationP 20, Less: Compensation Level (Table B, Line 3, Column 5) 16, ExcessP 3, Tax on P16,250.00P Tax on excess (P3, x 20%) Withholding tax for December, 2009 P 1,458.33
JERRY N. BENANING Asst. Chief, Withholding Tax Division For inquiries on Withholding Taxes You may call us at telephone numbers: / Or add:
Republic Act No. 9994, Otherwise Known as the "Expanded Senior Citizens A ct of 2010” RR Presented by: JERRY N. BENANING Withholding Tax Division, BIR
SEC. 2. Definitions Senior Citizen or Elderly — – any Filipino citizen who is a resident of the Philippines, – sixty (60) years old or above. – It may apply to senior citizens with “dual citizenship” status provided they prove their Filipino citizenship and have at least six (6) months residency in the Philippines
SEC. 2. Definitions Resident Citizen — a Filipino Citizen with permanent/ legal residence in the Philippines, and shall include one, who, having migrated to a foreign country, has returned to the Philippines with a definite intention to reside therein, and whose immigrant visa has been surrendered to the foreign government. Benefactor — refers to any person whether related or not to the senior citizen who provides care or who gives any form of assistance to him/her, and on whom the senior citizen is dependent on for primary care and material support, as certified by the City or Municipal Social Welfare and Development Officer (C/MSWDO).
SEC. 2. Definitions Dependent — a Senior Citizen, who may or may not be related to his/her Benefactor and who is living with and dependent upon his/her Benefactor for his/her chief support. Minimum Wage Earner – a worker in the private sector who is paid the statutory minimum wage, or an employee in the public sector with compensation income of not more than the statutory minimum wage in the non-agricultural sector where he/she is assigned OSCA — the Office for Senior Citizens Affairs of cities and municipalities, which is headed by a Senior Citizen who shall serve for a term of three (3) years.
SEC. 3. Income Tax of Senior Citizens. Generally, qualified Senior Citizens deriving returnable income during the taxable year, whether from compensation or otherwise, are required to file their income tax returns and pay the tax as they file the return. However, if the returnable income of a Senior Citizen is in the nature of compensation income but he qualifies as a minimum wage earner under RA No. 9504, he shall be exempt from income tax on the said compensation income subject to the rules provided under Revenue Regulations No applicable to minimum wage earners. Likewise, if the aggregate amount of gross income earned by the Senior Citizen during the taxable year does not exceed the amount of his personal exemptions (basic and additional), he shall be exempt from income tax and shall not be required to file an income tax return.
Hence, he can still be liable for other taxes such as : 1.The 20% final withholding tax on interest income from any currency bank deposit 2.The 7.5% final withholding tax on interest income from a depository bank under the expanded foreign currency deposit system (Sec. 24(B)(1), Tax Code 3.If the Senior Citizen will pre-terminate his 5-year long- term deposit or investment – Four years to less than five years — 5% – Three years to less than four years — 12%; and – Less than three years — 20%
Hence, he can still be liable for other taxes such as 4. The 10% final withholding tax – On cash and/or property dividends actually or constructively received from a domestic corporation or from a joint stock company, insurance or mutual fund company and a regional operating headquarters of a multinational company; or On the share of an individual in the distributable net income after tax of a partnership (except a general professional partnership) of which he is a partner; or On the share of an individual in the net income after tax of an association, a joint account, or a joint venture or consortium taxable as a corporation of which he is a member or a co-venturer (Sec. 24(B)(2), Tax Code). 5. Capital gains tax from sales of shares of stock not traded in the stock exchange (Sec. 24(C), Tax Code); and 6. The 6% final withholding tax on presumed capital gains from sale of real property, classified as capital asset, except capital gains presumed to have been realized from the sale or disposition of principal residence (Sec. 24(D), Tax Code).
SEC. 4. Grant of Discounts to Senior Citizens- 20%. 1.Medicines, including influenza and pneumococcal vaccines, and such other essential medical supplies, accessories and equipment to be determined by the DOH. On all drug stores, hospital pharmacies, medical and optical clinics and similar establishments dispensing medicines, the discount for sales of drugs/medicines shall be subject to the Guidelines to be issued by the BFAD-DOH, in coordination with the PHILHEALTH. For this purpose, the term "medicines" shall refer to both prescription and nonprescription medicines, and articles approved by the BFAD-DOH, which are intended for use in the diagnosis, cure, mitigation, treatment or prevention of disease in man; but do not include food and devices or their components, parts, or accessories. 2. On the professional fees of attending physician/s in all private hospitals, medical facilities, outpatient clinics and home health care services, where the discount shall be based on the compensation for services charged from the Senior Citizen.
1.On professional fees of licensed professional health workers providing home healthC.care services as endorsed by private hospitals or employed through home health care employment agencies, where the discount shall be based on the fees charged from the Senior Citizen. D. On medical and dental services, diagnostic and laboratory fees in all private hospitals, medical facilities, outpatient clinics, and home health care services, in accordance with the rules and regulations to be issued by the DOH, in coordination with the PhilHealth. “Medical services ” refers to hospital services, professional services of physicians and other health care professionals and diagnostic and laboratory tests that are necessary for the diagnosis or treatment of an illness or injury. “Dental services” refers to oral examination, cleaning, permanent and temporary filling extractions and gum treatments, restoration, replacement or repositioning of teeth, or alteration of the alveolar or periodontium process of the maxilla and the mandible that are necessary for the diagnosis or treatment of an illness or injury. “Home health care service” refers to health or supportive care provided to the Senior Citizen patient at home by licensed health care professionals to include but not limited to, physicians, nurses, midwives, physical therapists and caregivers
e.In actual fare for land transportation travel in – public utility buses (PUBs), – public utility jeepneys (PUJs), – taxis, – Asian utility vehicles (AUVs), – shuttle services and – public railways, including Light Rail Transit (LRT), Mass Rail Transit (MRT), and Philippine National Railways (PNR). f.On actual transportation fare for domestic air transport services and sea shipping vessels and the like, based on the actual fare and advanced booking.
G.On the utilization of services in hotels and similar lodging establishments, restaurants and recreation centers. g.1 For hotels and similar lodging establishments, the discount shall be for room accommodation and other amenities offered by the establishment, such as, but not limited to, massage parlor, sauna bath, food, drinks and other services offered. For this purpose, the term "hotel/hostel" shall refer to the building, edifice or premises or a completely independent part thereof, which is used for the regular reception, accommodation or lodging of travelers and tourists, and the provision of services incidental thereto, for a fee.
"Lodging establishment" shall refer to a building, edifice, structure, apartment or house including tourist inn, apartelle, motorist hotel and pension house engaged in catering, leasing or providing facilities to transients, tourists or travelers. The following are considered as lodging establishments: Tourist Inn — a lodging establishment catering to transients, which does not meet the minimum requirement of an economy hotel. Apartelle — a building or edifice containing several independent and furnished or semi-furnished apartments, regularly leased to tourists and travelers for dwelling on a more or less long-term basis and offering basic services to its tenants, similar to hotels. Motorist Hotel — any structure with several separate units, primarily located along the highway, with individual or common parking space, at which motorists may obtain lodging and in some instance, meals. Pension House — a private, or family-operated tourist boarding house, tourist guest house or tourist lodging house, regularly catering to tourist, and/or traveler, containing several independent table rooms, providing common facilities, such as toilets, bathrooms/showers, living and dining rooms and/or kitchen and where a combination of board and lodging may be provided.
G4. The term lodging establishment shall also include lodging houses, which shall mean such establishments are regularly engaged in the hotel business, but which, nevertheless, are not registered, classified and licensed as hotels by reason of inadequate essential facilities and services. Long term arrangement for residential purposes is not covered.
G.5. For restaurants, the discount shall be for the sale of food, drinks, dessert and other consumable items served by the establishments, including value meals and promotional meals offered for the consumption of the general public. G.6. For this purpose, the term "restaurant" shall refer to any establishment offering to the public, regular and special meals or menu, fast food, cooked food and short orders. Such eating places may also serve coffee, beverages and drinks. Food and goods sold by establishments that are not restaurants are not covered, therefore not allowed to give the 20% discount.
G.7For recreation centers, the discount shall be for the utilization of services in the form of fees, charges and rental facilities, such as, but not limited to, sports facilities and equipment.
H.On admission fees charged by theaters, cinema houses and concert halls, circuses, carnivals, and other similar places of culture, leisure and amusement, where the discount shall be on the admission fees charged by the said establishments;
I.On funeral and burial services for the death of Senior Citizens. The beneficiary or any person who shall shoulder the funeral and burial expenses of the deceased Senior Citizen shall claim the discount, such as: casket, embalmment, cremation cost and other related services for the Senior Citizen upon payment and presentation of his death certificate;
SEC. 5. Special Discount granted to Senior Citizens and Senior Citizens Centers. 5% discount upon concurrence of the following: 1.the individual meters in the name of the Senior Citizen residing therein; 2.the monthly consumption does not exceed – 100 kwh of electricity and – 30 m 3 of water ; and 3.the privilege is granted per household regardless of the number of Senior Citizens residing therein.
SEC. 5. Special Discount granted to Senior Citizens and Senior Citizens Centers. For water, electricity and telephone, there shall be granted by public utilities a discount of at least 50% on the consumption by a Senior Citizens Center and residential care/group homes that are run by the Government or by a non-stock, non-profit domestic corporation organized and operated primarily for the purpose of promoting the well-being of abandoned, neglected, unattached, or homeless Senior Citizens, subject to the guidelines formulated by the DSWD.
The discount that shall be granted to the Senior Citizen shall be the promotional discount or the minimum discount prescribed in this Regulation. This means that, in no case shall the discount granted to Senior Citizens be less than 20%, or in the case of water and electricity supplied by public utility companies, be less than 5%. The minimum discount shall not be treated as an addition to the promotional discount, provided that, if the promotional discount is less than the minimum discount prescribed in the Act for Senior Citizens, the seller shall increase the discount to meet the said minimum discount prescribed for Senior Citizens.
SEC. 6. Determination of the Amount of Discount. – The grant of the discount is only for the purchase of goods and services enumerated in the Act for THE EXCLUSIVE USE AND ENJOYMENT OR AVAILMENT OF THE SENIOR CITIZEN.
The following rules shall be observed in granting the discount: Medical-Related Privileges: (a) MEDICINE AND DRUG PURCHASES – The 20% discount and VAT exemption shall apply to the purchase of generic or branded medicines and drugs by or for senior citizens, including the purchase of influenza and pneumococcal vaccines. The 20% discount and VAT exemption shall also be granted to the purchase of vitamins and mineral supplements which are medically prescribed by an attending physician for prevention and treatment of diseases, illness, or injury whose prescription is in the name of the Senior Citizen.
Medical-Related Privileges: (b) ESSENTIAL MEDICAL SUPPLIES, ACCESSORIES AND EQUIPMENT – The 20% discount and VAT exemption privilege shall also apply to the purchase of – eyeglasses, hearing aids, – dentures, prosthetics, – artificial bone replacements like steel, walkers, crutches, wheelchairs whether manual or electric-powered, canes/quad canes, geriatric diapers, and other essential medical supplies, accessories and equipment by or for senior citizens.
Medical-Related Privileges: (c) MEDICAL AND DENTAL SERVICES IN PRIVATE FACILITIES – Medical and dental services, diagnostic and laboratory tests such as but not limited to X-Rays, computerized tomography scans, and blood tests, that are requested by a physician as necessary for the diagnosis and/or treatment of an illness or injury are subject to the 20% discount and VAT exemption. (d) PROFESSIONAL FEES OF ATTENDING PHYSICIAN/S in all private hospitals, medical facilities, outpatient clinics and home health care facilities shall be subject to the 20% discount and VAT exemption. (e) PROFESSIONAL FEES OF LICENSED HEALTH WORKERS PROVIDING HOME HEALTH CARE SERVICES as endorsed by private hospitals or employed through home health care employment agencies are entitled to the 20% discount and VAT exemption. agency given the health worker’s very minimal share compared to the agency fee. The burden of the discount shall be borne solely by the employment
Domestic Transportation Privileges: The DOTC, in coordination with the MARINA, PPA, CAB, LRTA, PNR, MRTA and LTFRB, shall within thirty (30) days from effectivity of these Rules issue the necessary circulars or directives on the following transportation privileges of senior citizens: (a) AIR AND SEA TRANSPORTATION PRIVILEGES – Fare for domestic air, and sea travel, including advanced booking, shall be subject to the 20% discount and VAT exemption, if applicable. (b) PUBLIC LAND TRANSPORTATION PRIVILEGES – Fare in public railways, including LRT, MRT, and PNR, fares in buses (PUB), jeepneys (PUJ), taxi and shuttle services (AUV), are likewise subject to the 20% discount and VAT exemption, if applicable.
Hotels, Restaurants, Recreational Centers and Places of Leisure, and Funeral Services (a)HOTELS AND SIMILAR LODGING ESTABLISHMENTS – The discount shall be for room accommodation and other amenities offered by the establishment such as but not limited to hotel-based parlors and barbershops, restaurants, massage parlor, spa, sauna bath, aromatherapy rooms, workout gyms, swimming pools, jacuzzis, ktv bars, internet facilities, food, drinks and other services offered. ` The term “hotel” shall include beach and mountain resorts. (b) RESTAURANTS – The discount shall be for the purchase of food, drinks, dessert, and other consumable items served by the establishments offered for the consumption of the general public. (c) For Dine-in services under paragraphs (a) and (b) of Section 3, and Section 4, paragraph 2 of Article 7, the privilege must be personally availed of by the senior citizen as defined under these Rules, and no proxies or authorization in favor of another person who is not a senior citizen will be honored.
Hotels, Restaurants, Recreational Centers and Places of Leisure, and Funeral Services (d)The phrase “exclusive use and enjoyment ” of the senior citizen shall mean “ for the senior citizen’s personal consumption” only. Shall not apply to “children’s meals” which are primarily prepared and intentionally marketed for children. Similarly, shall not apply to “pre-contracted” party packages or bulk orders.
Hotels, Restaurants, Recreational Centers and Places of Leisure, and Funeral Services (e) Food, drinks and other consumable items provided in Section 3 (a) and (b), and Section 4, paragraph 2 of Article 7 purchased by the senior citizen shall be processed separately as an independent transaction from his/her non- eligible companions to ensure that it is for his/her exclusive consumption and to enable computation of the 20% discount and the exemption from the VAT, which only the senior citizen is entitled to. However, if the group of diners is composed entirely of senior citizens, all of whom present valid senior citizens IDs, each shall be entitled to a 20% discount and exemption from Value Added Tax
Hotels, Restaurants, Recreational Centers and Places of Leisure, and Funeral Services (f) Apply to Take-Out/Take-Home/Drive-Thru orders (excluding bulk orders) as long as it is the senior citizen himself/herself who is present and personally ordering, and he/she can show a valid senior citizen ID card. (g)For Delivery Orders (excluding bulk orders), the 20% discount shall likewise apply subject to certain conditions ; i.e. – senior citizen ID card number must be given while making the order over the telephone; – the senior citizen ID card must also be presented upon delivery to verify the identity of the senior citizen – Delivery fee charged separately are not entitled to the discount and is subject to tax.
Hotels, Restaurants, Recreational Centers and Places of Leisure, and Funeral Services (h) For the above-mentioned transactions under paragraphs (f) and (g) of Section 3 of Article 7, the Most Expensive Meal Combination (MEMC) shall apply to food purchases by senior citizens. The MEMC is an amount corresponding to the combination of the most expensive and biggest single-serving meal with beverage served in a quick service restaurant, is deemed flexible and is adjusted accordingly by food establishments to estimate a single food purchase for an individual senior citizen.
Recreation Centers The discount shall be for the utilization of services in the form of fees, charges and rental for sports facilities or equipment, including golfcart rentals and green fees, or venues for ballroom dancing, yoga, badminton courts, bowling lanes, table or lawn tennis, workout gyms, martial arts facilities. Non-profit, stock golf and country clubs which are not open to the general public, and are private and for exclusive membership only as duly proven by their official SEC registration papers, are not mandated to give the 20% senior citizens discount. However, should restaurants and food establishments inside these country clubs be independent concessionaires and food sold are not consumable items under club membership dues, they must grant the 20% senior citizen discount.
Admission fees Privilege The discount shall be applied to admission fees charged by theatres, cinema houses and concert halls, circuses, carnivals, and other similar places of culture, leisure and amusement such as museums and parks.
Funeral and Burial Expenses The beneficiary or any person who shall shoulder the funeral and burial expenses of the deceased senior citizen, shall claim the discount under this Rule for the deceased senior citizen upon presentation of the death certificate. Such expenses shall cover the: – purchase of casket or urn, – embalming, – cremation cost, and – other related services such as viewing or wake cost, pick-up from the hospital morgue, transport of the body to intended burial site in the place of origin, but shall exclude : 1.obituary publication and 2.the cost of the memorial lot
SEC. 7. Tax Treatment of the Discount Granted to Senior Citizens May claim the discounts granted as a tax deduction based on the cost of the goods sold or services By way of example, if a VAT-registered drug store sells 10 pieces of Allopurinol at an undiscounted selling price of P5.00 per piece, the cost of the discount is computed as follows: Selling Price (VAT-exempt) of 10 pcs. at P5.00/pc.P50.00 Less: 20% Discount Amount Payable by the Senior Citizen P40.00
SEC. 7. Tax Treatment of the Discount The selling price to be charged by the seller must be net of VAT because the sale to Senior Citizens is exempt from VAT. The cost of the discount in the above illustration is P10.00 and shall be allowed as a deduction from gross income for the same taxable year that the discount is granted, provided that, the total amount of the claimed tax deduction net of VAT, if applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to proper documentation in accordance with the provisions of the Tax Code. This means that for the establishment to be allowed to claim the discount as a deduction, the amount of sales that must be reported for tax purposes is the undiscounted selling price and not the amount of sales net of the discount. The income statement of the seller must reflect the discount, not as a reduction of sales to arrive at net sales, but as a deduction from its gross income (sales less cost of sales).
Entry to record the transaction in the books of the seller Debit – CashP40 Senior Citizen Discount Expense 10 Credit – SalesP50 treated as an ordinary and necessary expenses deductible from the gross income of the seller falling under the category of itemized deductions, and can only be claimed if the seller does not opt for the Optional Standard Deduction during the taxable quarter/year.
Deduction from the gross income of the seller is subject to the following conditions: Only that portion of the gross sales exclusively used, consumed or enjoyed by the Senior Citizen shall be eligible for the deductible sales discount. The gross selling price and the sales discount must be separately indicated in the official receipt or sales invoice Only the actual amount of the discount granted or a sales discount not less than the statutory rate (20%, 5% or 50% when applicable), whichever is higher, based on the gross selling price can be deducted from the gross income, net of value added tax, if applicable, for income tax purposes, and from gross sales or gross receipts of the business enterprise concerned, for VAT or other percentage tax purposes. The seller must record its sales inclusive of the discount granted.
Deduction from the gross income of the seller is subject to the following conditions: Only that portion of the gross sales exclusively used, consumed or enjoyed by the Senior Citizen shall be eligible for the deductible sales discount. The business establishment giving sales discounts to qualified Senior Citizens is required to keep a separate and accurate record of sales, which shall include the – name of the Senior Citizen, – OSCA ID, – gross sales/receipts, – sales discount granted, – dates of transactions and – invoice numbers for every sale transaction to Senior Cit izen.
Deduction from the gross income of the seller is subject to the following conditions: Only business establishments selling any of the qualified goods and services to Senior Citizens where an actual discount was granted may claim the deduction. The seller must not claim the Optional Standard Deduction during the taxable year.
SEC. 8. Availment of Income Tax 1.A Senior Citizen must first be qualified as such by the CIR or his duly authorized representative (RDO having jurisdiction over the place where the Senior Citizen resides), by submitting a certified true copy of his Senior Citizen Identification Card (OSCA ID) issued by the OSCA of the city or municipality where he resides; 2.He must file a Sworn Statement on or before January 31 of every year that his annual taxable income for the previous year does not exceed the poverty level as determined by the NEDA thru the NSCB; and 3.If qualified, his name shall be recorded by the RDO in the Master List of Tax-Exempt Senior Citizens for that particular year, which the RDO is mandatorily required to keep. However, a Senior Citizen who is a compensation income earner deriving from only one employer an annual taxable income exceeding the poverty level or the amount determined by the NEDA thru the NSCB on a particular year, but whose income had been subjected to the withholding tax on compensation, shall, although not exempt from income tax, be entitled to the substituted filing of income tax return under Revenue Regulations No. 2-98, as amended.
SEC. 9. Liability for Other Internal Revenue Taxes A Senior Citizen shall also be subject to the following internal revenue taxes, among others, imposed under the Tax Code: VAT or other Percentages Taxes, as the case may be. – If he is self-employed or engaged in business or practice of profession, and his gross annual sales and/or receipts exceeds P1,500,000 or such amount to which this may be adjusted pursuant to Sec. 109(1)(V) of the Tax Code, he shall be subject to VAT. Otherwise, he shall be subject to the 3% percentage tax; Donor's Tax – All donations made by a Senior Citizen during any calendar year, unless exempt under a specific provision of law, shall be subject to the donor’s tax imposed under Title III of the Tax Code; Estate Tax – In the event of death, the estate of the Senior Citizen may also be subject to the estate tax following the rules enunciated under Title III of the Tax Code and its implementing Regulations; Excise Tax on certain goods ; and Documentary Stamp Tax.
SEC. 10. Exemption from VAT of the sale to Senior Citizens.- Sales of any goods and services under Sections 4 and 5 of these Regulations to Senior Citizens shall be exempt from VAT. To ensure the full entitlement of the Senior Citizen to the discount prescribed in the Act, the sellers are precluded from billing any VAT to the Senior Citizen. The sale to a Senior Citizen must follow the invoicing requirements prescribed under Revenue Regulations No If the seller uses a Point of Sale Machine or a Cash Register Machine in lieu of the regular sales invoice, the machine tape must properly segregate the exempt sales from the taxable sales.
SEC. 10. Exemption from VAT of the sale to Senior Citizens.- The input tax attributable to the exempt sale shall not be allowed as an input tax credit and must be closed to cost or expense account by the seller. The exemption herein granted will not cover other indirect taxes that may be passed on by the seller to a Senior Citizen buyer, such as percentage tax, excise tax, etc. In such a case, the discount must be on the total cost of the goods or services charged by the seller exclusive of the tax.
SEC. 11. Personal Exemptions of Benefactors of Senior Citizens The entitlement to claim the additional personal exemption per dependent (not exceeding four) is allowable only to individual taxpayers with a qualified dependent child or children subject to the conditions set forth under Section 35(B) of the Tax Code, as amended. If required to file an income tax return (ITR), the Benefactor shall state therein the name, birthday and OSCA ID number of the dependent Senior Citizen.
SEC. 12. Additional Deduction from Gross Income of Private Establishments for Compensation Paid to Senior Citizens Private establishments employing Senior Citizens shall be entitled to additional deduction from their gross income equivalent to 15% of the total amount paid as salaries and wages to Senior Citizens subject to the provision of Section 34 of the Tax Code and its implementing rules and regulations provided the following conditions are met: 1.The employment shall have to continue for a period of at least 6 mos; 2.The annual taxable income of the Senior Citizen does not exceed the poverty level as may be determined by the NEDA thru the NSCB. For this purpose, the Senior Citizen shall submit to his employer a sworn certification that his annual taxable income does not exceed the poverty level.
SEC. 13. Penalties and Other Sanctions 1.For the first violation, a fine of not less than P50, but not exceeding P100, and imprisonment of not less than 2 years but not more than 6 years; and 2.For any subsequent violation, a fine of not less than P100, but not exceeding P200, and imprisonment for not less than 2 years but not less than 6 years. Any person who abuses the privileges granted herein shall be punished with a fine of not less than P50,000.00, but not more than P100,000.00, and imprisonment of not less than 6 months.
SEC. 13. Penalties and Other Sanctions If the offender is an alien or a foreigner, he shall be deported immediately after service of sentence without further deportation proceedings. If the offender is a corporation, organization or any similar entity, the official/s thereof directly involved shall be liable therefore. Upon filing an appropriate complaint, and after due notice and hearing, the proper authorities may also cause the cancellation or revocation of the business permit, permit to operate, franchise and other similar privileges granted to any business entity that fails to abide by the provisions of the Act and its IRR and these Regulations.
Salamat po! JERRY N. BENANING Withholding Tax Division Room 207, National Office Bldg., BIR, Diliman, QC / BIR Contact Center: (02)
Reasons Why the Government Gives Discounts to Senior Citizens: 1. FOOD – marami nang bawal. 2. TRANSPORTATION – nahirapan nang sumakay. 3. GROCERIES – ‘di na kayang buhatin. 4. CINEMA – malabo na ang mata. 5. CONCERTS – mahina na ang pandinig. 6. GAMOT – hindi malunok. 7. HOTELS – anong gagawin naman duon? Enjoy life while you’re still young, don’t wait for discounts.
UPDATES 1. Revenue Regulations (RR) No dated Feb. 24, 2011: “Tax Treatment of Income Earnings and Money Remittance of an Overseas Contract Worker (OCW) or Overseas Filipino Worker (OFW): As to income tax, taxable only on income from sources within the Philippines. Thus, if the OFW has income earnings from business activities or properties within the Philippines, such income earnings are subject to Philippine income tax as follows: a.Regular income tax at 5% to 32% Passive incomes are subject to tax Subject to business tax b. Passive incomes are subject to tax c. Subject to business tax
Exempt from payment of travel tax and airport fee per RA No “Migrant Workers and Overseas Filipinos Act of 1995” upon proper showing of proof of entitlement (that is Overseas Employment Certificate issued by POEA) Remittances of all OCWs and OFWs shall be exempt from Documentary Stamp Tax (DST) upon showing of valid OWWA Membership Certificate by the OCW or OFW beneficiary or recipient. In the case of OCWs and OFWs whose remittances are sent through the banking system credited to beneficiaries or recipient’s account in the Philippines and withdrawn through an ATM, it shall be the responsibility of the OCW or OFW to show the valid proof of entitlement when making arrangement for his/her remittance transfers. A PROOF OF ENTITLEMENT THAT IS NO LONGER VALID SHALL NOT ENTITLE AN OCW OR OFW TO ANY DST EXEMPTION.
2. RR : Filing of ITR with the Annual Information Return (AIR) -(Suspended indefinitely by RR ) but RR requires the use of the new income tax returns (1700, 1701 and 1702 November 2011 version) in the filing of ITRs for CY RR : “De Minimis Benefits” Not subject to income tax and withholding tax. The following are considered “de minimis benefits”: a.Monetized vacation leave credits of private employees not exceeding ten (10) days during the year; b. Monetized value of vacation and sick leave credits paid to government officials and employees [see BIR Ruling DA(ECB-028) dated December 28, 2009 which states: “Thus, the monetized unused vacation leave credits of private employees is limited to ten (10) days while leave (sick and vacation) credits paid to government employees is not subject to limitation.”
c. Medical cash allowance to dependents of employees not exceeding P per employee per semester or P per month; d. Rice subsidy of P1, or one (1) sack of 50 kg. rice per month amounting to not more than P1,500.00; e. Uniform and clothing allowance not exceeding P4, per annum; f. Actual medical assistance, e. g. medical allowance to cover medical and healthcare needs, annual medical/executive check-up, maternity assistance and routing consultations, not exceeding P10,000 per annum; g. Laundry allowance not exceeding P300 per month;
h. Employees achievement awards, e.g. for length of service or safety achieve, which must be in the form of a tangible personal property other than cash or gift certificate, with an annual monetary value not exceeding P10,000 received by the employee under an established written plan which does not discriminate in favor of highly paid employees; i. Gifts given during Christmas and anniversasry celebrations not exceeding P5,000 per employee per annum; and j. 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.
NOTE: All other benefits given by employers which are not included in the above enumeration shall not be considered “de minimis” benefits, and hence, shall be subject to income tax as well as withholding tax on compensation income. 4. Revenue Memorandum Circular (RMC) No : Additional COLA for Minimum Wage Earners (MWE) in the NCR. Statutory Minimum Wage (SMW) in the NCR is now P426.00/day pursuant to Wage Order No. NCR 16. Thus, MWEs in NCR receiving the said SMW, holiday pay, overtime pay, hazard pay and night shift differential shall be exempt from income tax and withholding tax. 5. RMC : Circularized RA “An Act Granting Income Tax Exemption to Local Water Districts by Amending Section 27(C) of the NIRC of 1997, as amended, and adding Section 289-A to the Tax Code (Support for Local Water Districts). Became subject to income tax is PAGCOR which was previously not subject to income tax pursuant to RA 9337.
6. RMC No : Reiteration of the applicable penalties for employers who fail to withhold, remit, do the year-end adjustment and refund excess taxes withheld to employees 7. Unnumbered memorandum of the Commissioner dated May 26, 2011: Reiteration that BIR shall no longer process any claim for tax refund of employees and RDOs to remind employers to strictly comply with the year-end adjustment (tax due equals tax withheld) 8. RMC (undated) : Revokes previously issued rulings stating that all contributions to SSS, GSIS, Medicare and Philhealth are non-taxable. “The non- taxable contributions to these government offices cover only the mandatory contributions and all other voluntary contributions in excess of what the law allows are subject to income tax and withholding tax.
9. RMC dated November 4, 2011 : Effectivity of the taxability of voluntary contributions to SSS, GSIS, Philhealth and Pag-ibig is July 1, Revenue Regulations No dated Oct. 27, 2011: Increased the amounts for sale of residential lot, sale of house and lot, lease of residential unit and sale or lease of goods or properties or performance of services (2005), as follows: From To Sec. 109 (P) Sale of residential lot P1,500,009 P1,919,500 Sec.109(P) Sale of house and lot 2,500,000 3,199,200 Sec. 109(Q) Lease of residential 10,000 12,800 Sec. 109(V) Sale or lease of goods or properties 1,500,000 1,919, As of January 24, 2012: There were already 87 Run After Tax Evaders (RATE) cases filed by BIR with the DOJ.
12. There is a proposed revenue regulations increasing withholding tax rates on certain income payments: Public hearing was held on December 1, 2011 in the National Training of the BIR attended by an estimated 400 plus participants of private and public offices. Notable among the proposals is the increase in the EWT rates for the purchase of goods from 1% to 2% and services from 2% to 4%.
SALAMAT PO! JERRY N. BENANING Withholding Tax Division Room 207, National Office Bldg., BIR, Diliman, QC / BIR Contact Center: (02)