final withholding tax - Accounting Division

Report
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
2.78.3 of Revenue Regulations No.
2-98 (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
10-2008.
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
P30,000.00 for the TAXABLE YEAR. [see RA
6686 and PD 851, as amended by Memorandum Order
No. 28 8-13-86; 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
P250,000.00 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: P50,000.00 (50% beginning
July 6, 2008 / 100% beginning 2009 )
(pursuant to RA 9504 as implemented by RR 10-2008)
• 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:
• BIR FORM 1902 (TRU Form) to be submitted by
employee to employer within ten (10) days upon
commencement of employment.
• BIR FORM 2305 - 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 5-2011)
•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 P750.00 per employee per semester or
P125.00/month;
• Rice subsidy - P1,500.00 or one sack of 50 kg. rice/month
amounting to not more than P1,500.00;
• Uniform & clothing allowance - Not exceeding
P4,000.00 per annum ;
•Actual medical assistance, e.g. medical allowance to
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 P10,000.00 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 P5,000.00 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 2.78.2, RR 2-98]
Daily, weekly, semi-monthly, monthly, etc.
• WITHHOLDING TAX TABLE
Daily, weekly, semi-monthly & monthly
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 10-2008]
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 25-91 and RMO 262011)
Any amount received by the employee on
account of dismissal is taxable [Section 2.78.1(B)(b),
RR 2-98
Annualized
Withholding Tax
(Year-EndAdjustment)
21
Annualized Withholding Tax
(Year-End-Adjustment)
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.
22
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 10-2008
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;
23
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:
-
P50,000.00
Additional Exemption:
P 25,000 for each qualified dependent child
not exceeding four (4)
24
Annualized Withholding Tax
(Year-End-Adjustment)
STEP 4 -
NOTE:
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.
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.
25
Annualized Withholding Tax
(Year-End-Adjustment)
STEP 5 - Compute the amount of tax on the difference arrived
at in Step 4.
Not over P10,000
5%
over P10,000 but not over P30,000
P500 + 10% of the excess over P10,000
over P30,000 but not over P70,000
P2,500 + 15% of the excess over P30,000
over P70,000 but not over P140,000
P8,500 + 20% of the excess over P70,000
over P140,000 but not over P250,000
P22,500 + 25% of the excess over P140,000
over P250,000 but not over P500,000
P50,000 + 30% of the excess over P250,000
over P500,000
P125,000 + 32% of the excess over P500,000
26
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.
27
Year-End Adjustment - Formula
GROSS COMPENSATION INCOME (previous + present employer)
LESS: Non-Taxable Items
a. 13th month pay, Christmas bonus
loyalty Award, gift in cash/kind
and other benefits [Sec. 2.78.1 (b)(11), RR 2-98]
P 30,000.00
b. SSS, GSIS, Medicare, Pag-ibig and
union dues of individual employees
xxxxx
c. 10 days monetized vacation leave
xxxxx
d. Other non-taxable compensation income
xxxxx
GROSS TAXABLE COMPENSATION INCOME
Less: Total Exemptions
P
xxx
Premium paid on Health or Hospitalization
Insurance (Maximum of P2,400.00)
xxx
Taxable Compensation Income
Pxxx
xxx
Pxxx
Tax Due: Refer to Annualized Tax Table, Section 24(A), Tax Code
Less: Tax Withheld (Jan. to November, from previous & present employer)
Amount to be withheld in December /refunded on Jan. 25 ff year
Pxxx
xxx
Pxxx
xxxx
Pxxx
28
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:
BREAK-EVEN:
Tax Due < Tax Withheld ----- refund on or before
Jan. 25th of the ff. year/last payment of wages
Tax Due = Tax Withheld ----- do not withhold
from December salary
29
Sample Problem 1
Mr. Dexter, single receives P 25 ,000 (net
of SSS, Philhealth, HDMF and other nontaxable items of gross income) as monthly
regular compensation starting January 1, 2009,
he filed his resignation effective June 30, 2009.
The tax withheld from January to May was
P15,000.00
30
Sample Problem 1
Computation:
Total compensation received from January 1 to May 31, 2009
Add: Compensation to be received on June
Gross Compensation Jan. – June, 2009
Less: Personal Exemption
Taxable Compensation
P 125,000.00
25,000.00
P150,000.00
50,000.00
P 100,000.00
Tax Due *
Less: Tax Withheld from Jan. to May
Excess tax withheld to be refunded by employer
on or before June 30, 2009 of the current year
P 14,500.00
15,000.00
P 500.00
* Tax Due on P70,000.00
Tax on excess (P30,000 x 20%)
Tax on P23,000
P 8,500.00
6,000.00
P 14,500.00
31
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 P35,000.00.
Total Compensation Jan. - Nov. (P25,000 x 11 mos.)
Add: Compensation to be received in Dec.
Gross Compensation Income
Less: Personal Exemption - Married
P 50,000
Additional Exemptions - 2 x P25,000
50,000
Taxable Compensation Income
P 275,000.00
25,000.00
P 300,000.00
Tax Due*
Less Tax Withheld from Jan. to Nov.
To be withheld from employee’s December salary
P 37,500.00
35,000.00
P 2,500.00
Tax on P140,000.00
Tax on excess (P60,000.00 x 25%)
*TAX DUE
P22,500.00
15,000.00
P37,500.00
P100,000.00
P200,000.00
32
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 3.5inch diskette.
FOR EFPS FILERS: Submit through e-submission or any other required
e-filing systems
33
Employers are required to submit the
ANNUAL INFORMATION RETURN OF INCOME
TAXES WITHHELD ON COMPENSATION AND
FINAL WITHHOLDING TAXES (BIR Form No. 1604CF) 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)
34
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. 2316
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.
35
Individuals Qualified for Substituted Filing and are not
required to file BIR Form No. 1700
(RRs 3-2002, 19-2002, 10-2008, RMC 1-2003)
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).
36
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.
37
Individuals NOT qualified for substituted filing
and MUST file BIR Form no. 1700
1. 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 10-2008
38
Individuals NOT qualified for substituted
filing and MUST file BIR Form no. 1700
4. Individuals deriving other non-business, non-professionrelated 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, nonprofessional-related income.
39
Individuals NOT qualified for substituted
filing and MUST file BIR Form no. 1700
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
40
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)
:
41
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.
42
Uses of BIR Form No. 2316
1. 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.
JERRY N. BENANING
Withholding Tax Division
Telephone Numbers:
926-93-47 / 927-09-98
Telefax: 926-93-28
e-mail: [email protected]
44
Another 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. 57-59, R.A. 8424 as
implemented by RR Nos. 2-98, 6-2001, 12-2001,
4-2002, 14-2002, 17-2003, 30-2003, 1-2004, 3-2004,
8-2005, 7-2008, 2-2009; 6-2009; 8-2009; 10-2009
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 12-2001)
EXPANDED WITHHOLDING TAX
D. FILING AND REMITTANCE - [with MAP, RR 2-2006)]
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 2-2006)
For EFPS filers, filing of return shall be governed by
the provisions of RR 26-2002 (grouping by industry) while
remittance shall be additional five (5) days from that of
regular withholding agents. Remittance returns are BIR
Form No. 1601-E and BIR Form No. 1606 (for real property
transactions subject to EWT)
EXPANDED WITHHOLDING TAX
E. CERTIFICATES BIR Form No. 2307 - 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. 1604-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 P720,000.00 and 10% if
otherwise. (RR 2-98,/6-2001/12-2001/30-2003)
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 2-98/6-2001/30-2003)
C. Rentals of:
1. Real Property (RR 2-98/6-2001)
- 5%
2. Personal Property (RR 14-2002/17-2003) -5%
D. Cinematographic film rentals and
other payments (RR 2-98/^-2001)
-
5%
E. Income payments to contractors -
2%
(RR 2-98/6-2001/14-2002/17-2003)
(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) - - - - - - - - 15%
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 2-98/6-2001/14-2002/17-2003) - - - - - - - -10%
H. Income payments to partners of General
Professional Partnership (GPP ) (RR 2-98/6-2001/30-2003)
– 15% or 10%
INCOME PAYMENT – EWT
I. Professional fees paid to medical practitioners
by patients admitted and confined to hospitals
or clinics (RR 2-98/12-98/3-99/14-2002/17-2003/30-2003) – 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 2-98/62001/17-2003)
- Exempt transaction
- 0%
- Selling price is not over P500,000
- 1.5%
- 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 12-94,17-2003, 30-2003, 14-2008) . With
conditions on agricultural products per Section 2, RR 6-2009)
Goods
Services -
1%
2%
INCOME PAYMENT
N. Income payments by government (RR 2-98/6-2001/142002/17-2003/30-2003)
Goods
Services
-
1%
2%
O. Commission of independent and exclusive
distributors, medical, technical and sales
representatives and marketing agents of multi-level
marketing companies (RR 2-98/17-2003) - 10%
P. Tolling fees paid to refineries (RR 14-2002) - 5%
Q. Payments made by pre-need companies to funeral
parlors (RR 14-2002) - 1%
INCOME PAYMENT - EWT
R. Payments of funeral parlors to embalmers
- 1%
(RR 14-2002)
S. Income payments made to suppliers of agricultural
products [applies only to top 20000 corporations,
government offices and top 5000 individual taxpayers
(with conditions) (RR 17-2003/30-2003/1-2004/3-2004/6-2009)
--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 17-2003/7-2008) – 10%
INCOME PAYMENT – EWT
U. Meralco refund to customers arising from
Supreme Court decision under SC case
GR 14814 dated April 9, 2003 as approved
by ERC: (RR 8-2005/2-2009)
- 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 2-2009)
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. - - - - - - - - - - - 20%
INCOME PAYMENT – EWT
W. Payments made by the Top 5,000 Individual TPs
to their local/resident suppliers of goods and services other than those covered by other rates of
withholding tax: (RR 6-2009) – 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 8-2009/10-2009)
MARAMING SALAMAT PO!
JERRY N. BENANING
WITHHOLDING TAX DIVISION
Bureau of Internal Revenue
Telephone Numbers:
Telefax
:
926-93-47
927-09-98
926-93-28
Email: [email protected]
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.
FINAL WITHHOLDING 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)
Fringe Benefit
Valuation
1. Housing
a. Er leases residential property
which is the usual place of
residence of the employee
Value of the benefit (VB)
shall be the amount of
rental paid by the Er (per lease
contract).
The Monetary Value
(MV) is 50% of VB.
FINAL WITHHOLDING TAX
A. FBT – Housing
Fringe Benefit
1. b. Er owns residential property and
the same is assigned for the use
of his employee as his usual
place of residence
c. Er purchases residential property
on installment basis and allows
Ee to use the same as his usual
place of residence
Valuation
Annual VB is 5% of the market
value of land and improvement.
The MV shall be 50% of the VB.
MV = [5%(FMV or ZV] x 50%
Annual VB is 5% of acquisition
cost, exclusive of interest. MV
is 50% of the VB.
FINAL WITHHOLDING TAX
A. FBT – Housing
Fringe Benefit
1. d. If Er purchases residential property
and transfers ownership in the name
of Ee, the VB shall be the Er’s acquisition cost or ZV
e. If Er purchases a residential property
& transfers ownership to Ee for his
residential use, at a price less than the
Er’s acquisition cost
Valuation
MV shall be entire value
of the benefit
VB shall be the difference
between the FMV or ZV
and the cost to the Er.
MV shall be the entire
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:
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)
h. Temporary housing for an employee who stays in a housing unit
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.
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,
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
2.78.1(A)(6), RR 2-98, as amended by RR 8-2000]
3. MOTOR VEHICLE
Fringe Benefit
Valuation
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
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)
c. Er purchases car on installment,
the ownership of which is placed
in the name of the Ee
VB is the acquisition
cost exclusive of
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
Fringe Benefit
3. d. Er shoulders portion of the
amount of the purchase price
of the vehicle the ownership
of which is placed in the
name of the Ee.
e. Er owns & maintains a fleet
of motor vehicles for the use
of the business and employees
Valuation
VB is the amount
shouldered by Er. MV
is the entire value of FB
(regardless if it is used by Ee partly for
personal purpose and partly for the benefit
of the Er)
VB is the acqusition cost of
all vehicles NOT normally
used for sales, freight, delivery service and other nonpersonal use divided by 5 yrs.
MV of FB is 50% of VB or
MV = [(AC/5] x 50%
FINAL WITHHOLDING TAX
• A. FBT - MOTOR VEHICLE
Fringe Benefit
3. f. Er leases & maintains a fleet
of motor vehicles for the use
of the business & employees
Valuation
VB is the amount of
rental payments for
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
3. h.
Fringe Benefit
Use of yacht, whether owned
and maintained or leased by
the Er, shall be treated as
taxable FB.
Valuation
VB is measured based
on the depreciation of
the yacht at an estimated 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.
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 $2300.00 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 EXPENSESHoliday 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 - 10. 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 8-2000, 10-2000 and 10-2008;
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. 57-59, RA 8424, Sec. 2.57, RR 2-98,
RRs 10-98, 6-2001, 12-2001, 17-2003,
30-2003, 2-2006, 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 - - - - - - - - - - - - - 10%
e. Prizes (except amounting to P10,000 or less) - - - - - - - f. Winnings (except PCSO & Lotto) - - - - - - - - - - - •
•
20%
7.5%
20%
20%
20%
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 - - - - - 5%
3 years to less than 4 years - - - - - - 12%
Less than 3 years - - - - - - - - - - - - 20%
g. Cash and/or property dividends - - - - - 10%
FINAL WITHHOLDING TAX
2. Payment to Non-resident Alien Individual:
a. Engaged in trade or business within the Phils:
1. Cash and/or property dividends, interest,
royalties, prizes (except amounting to P10,000 or less),
winnings (except PCSO & Lotto)
2. Royalties on books, literary works and
musical compositions
3. Cinematographic films and similar work
Rate
20%
10%
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 - - - - - - - - - - - 5%
3 years to less than 4 years - - - - - - - - - - - 12%
Less than 3 years - - - - - - - - - - - - - - - - - 20%
5. Income from contracts by sub-contractors
from service contractors engaged in
‘petroleum operations’ under PD 87 - - - - - - 8%
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 - - - - - - 20%
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 41-2009)
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 41-2009 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 - - - - - - - - - - - - - - - - - - - - - - - - 25%
3. Payment to a Domestic Corporation
a. Interest on Phil. Currency bank deposits
& yield on deposit substitutes, etc. - - - - - - - 20%
FINAL WITHHOLDING TAX
3. Payment to a Domestic Corporation
a. Interest on Phil. Currency bank deposits
& yield on deposit substitutes, etc. - - - - - - - 20%
b. Interest under the Foreign Currency
Deposit System - - - - - - - - - - - - - - - - - - - 7.5%
c. Royalties - - - - - - - - - - - - - - - - - - - - - - - - 20%
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. - - - - - - - 20%
b. Interest under the Foreign Currency
Deposit System - - - - - - - - - - - - - - - - - - - 7.5%
c. Royalties - - - - - - - - - - - - - - - - - - - - - - - - 20%
d. Dividends received from domestic corporation
is not subject to tax
e. Branch profit remittance - - - - - - - - - - - - - - 15%
5. Income derived by OBU and FCDU from
foreign currency transactions with local
commercial banks - - - - - - - - - - - - - - - - - - - - 10%
FINAL WITHHOLDING TAX
4. Payment to a NON-RESIDENT FOREIGN CORPORATION
a. Cinematographic films and similar work - - - - - - 25%
b. Vessels chartered by Philippine nationals - - - - - - 4.5%
c. Lessor or aircraft, machineries & other eqpmt - - 7.5%
d. Interest on foreign loans - - - - - - - - - - - - - - - - - 20%
e. Cash or property dividends received from
domestic corporation* - - - - - - - - - - - - - - - - - - - - 15%
[*with conditions under Section 28(B)(5)(b) of the Tax Code and
Section 2.57.1(I)((1) of RR 2-98]
f. Other payments to NRFC - - - - - - - - - - - - - - - - - - 30%
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 10th day of the month
following end of calendar quarter.
For EFPS filers, additional 5 days
- Remittance return is BIR Form
No. 1603 (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 10th day of the
following month.
- Remittance return is BIR Form No. 1602
- Venue for payment is at the AAB within the
RDO where WA is registered/RCO/LTDO/LTSNO.
FINAL WITHHOLDING TAX
Remittance:
3. Other Final Taxes
- Due date is on or before the 10th 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. 1601-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. 2306
- On or before January 31 of the ff. year
Nature of taxes withheld: Non-creditable
Annual information return:
a. FBT & OFT – BIR Form No. 1604-CF
and alphalist of payees
b. Interest on bank deposit – BIR Form No.
1604-CF but no alphalist of payees
GOVERNMENT MONEY PAYMENT
[Sections 4.114 and 5.116, RR 2-98, RA 9337 as implemented by RR 16(2005 )
A. STATUTORY BASES:
1. For NON-VAT payees - Sec. 5.116, RR
No. 2-98 (GMP)
2. For VAT taxpayers/payees - Sec. 114(C) ,
R.A. 8424, as amended by RA 9337; Sec.
4.114, RR No. 2-98, as amended by RR 162005 (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 8-2003)
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. 1600.
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. 2307. (RR 4-2002)
b. VAT PAYEES - not later than 10 days after
the end of each month using BIR Form No.
2306 (RR 4-2002, RR 16-2005)
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, 8-2003)
G. NATURE OF TAX WITHHELD
a. GMP- creditable against percentage tax due
b. GVAT – Non-creditable (see Section 4.114.2 of RR 16-2005)
GOVERNMENT MONEY PAYMENT
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)
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 - - - - - - - - - - - - - - - - - - - - - 5%
Maturity period is more than 5 years - - - - - - - - - - - - - - - - - - - - 1%
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- - - - - - - - - - - - - - - - - - - - - - - - - - - - - 7%
d. On the net trading gains within the taxable year on foreign
currency, debt securities, derivatives and other financial
instruments - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 7%
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
Over 7 years
1%
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. 5.116(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)
10. Sale, barter or exchange of shares of stock
listed and traded through the local stock exchange
1/2 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%
- Over 25% but nor exceeding 33 1/3%
- Over 33 1/3%
4%
2%
1%
GOVERNMENT MONEY PAYMENT
TRANSACTIONS SUBJECT TO GVAT:
B. VAT PAYEES
1. Purchase of Goods & Services
2. Payment for lease or use of
properties or property rights
to non-resident owners
5%
12%
GOVERNMENT MONEY PAYMENT
3.
Payment for services rendered to local
insurance companies with respect to
reinsurance premiums payable to nonresident insurance or reinsurance
companies; - 12% and
4. Services rendered in the Philippines by
non-residents - 12%
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 10-2008]
STEP 1.
USE THE APPROPRIATE
WITHHOLDING TAX TABLE for the payroll
period; monthly, semi-monthly, weekly or
daily as the case may be.
WEEKLY
1
2
3
4
5
6
7
8
Exemption
0.00
0.00
9.62
48.08
163.46
432.69
961.54
2,403.85
Status
(`000P)
+0%
over
+5%
over
+10%
over
+15%
over
+20%
over
+25%
over
+30%
over
+32%
over
577
1,538
1,346
2,308
2,692
3,654
4,808
5,769
9,615
10,577
A. Table for employees without qualified dependent
1. Z
2. S/ME
0.0
50.0
1
1
0
962
192
1,154
B. Table for employee with qualified dependent child(ren)
1. ME1 / S1
75.0
1
1,442
1,635
2,019
2,788
4,135
6,250
11,058
2. ME2 / S2
100.0
1
1,923
2,115
2,500
3,269
4,615
6,731
11,538
3. ME3 / S3
125.0
1
2,404
2,596
2,981
3,750
5,096
7,212
12,019
4. ME4 / S4
150.0
1
2,885
3,077
3,462
4,231
5,577
7,692
12,500
MONTHLY
1
Exemption
0.00
0.00
Status
(`000P)
+0%
over
+5%
over
2
3
4
41.67 208.33
+10%
over
5
6
708.33 1,875.00
7
8
4,166.67
10,416.
67
+15%
over
+20%
over
+25%
over
+30%
over
+32%
over
A. Table for employees without qualified dependent
1. Z
2. S/ME
0.0
1
0
833
2,500
5,833
11,667
20,833
41,667
50.0
1
4,167
5,000
6,667
10,000
15,833
25,000
45,833
B. Table for employee with qualified dependent child(ren)
1. ME1 / S1
75.0
1
6,250
7,083
8,750
12,083
17,917
27,083
47,917
2. ME2 / S2
100.0
1
8,333
9,167 10,833
14,167
20,000
29,167
50,000
3. ME3 / S3
125.0
1 10,417 11,250 12,917
16,250
22,083
31,250
52,083
4. ME4 / S4
150.0
1 12,500 13,333 15,000
18,333
24,167
33,333
54,167
STEP 2. DETERMINE THE TOTAL MONETARY AND
NON-MONETARY COMPENSATION paid to an
employee for the payroll period, segregating
gross benefits which includes thirteenth (13th)
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 nontaxable income are those which are specifically
exempted from income tax under the Tax Code or
by other special laws as listed in Section 2.78.1(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 P12,000.00 (net of all non-taxable
items of gross income) as regular monthly
compensation for March, 2009. 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 P708.33 on
P10,000.00 plus 20% of the excess (P12,000.00 less
P10,000.00 = P2,000.00).
Taxable compensation
P12,000.00
Less: Compensation level
(Table A, Line 2, Column 5)
10,000.00
Excess
P 2,000.00
Tax on P10,000.00
P 708.33
Tax on excess (P2,000.00 x 20%)
400.00
Withholding tax for March, 2009
P 1,108.33
EXAMPLE 2: Mr. B, single (S2) with two (2)
qualified dependent children, receives
P7,500.00.00 as semi-monthly regular
compensation (net of non-taxable items) and
P800.00 as commission (supplementary
compensation) for January, 2009, or a total of
P8,300.00.
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 P354.17 plus 20% of the excess (P8,300.00 less
P7,083.00 = P1,217.00).
Total taxable compensation
Less: compensation level
(Table B, Line 2, Column 5)
Excess
Tax on P7,083.00
Tax on excess (P1,217.00 x 20%)
Withholding tax for January, 2009
P8,300.00
7,083.00
P1,217.00
P 354.17
243.40
P 597.57
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
P1,875.00 on P15,833.00 plus 25% of the excess
(P20,000.00 less P15,833.00 = P4,167.00).
Total taxable compensation
P20,000.00
Less: Compensation Level
(Table A, Line 2, Column 6)
15,833.00
Excess
P 4,167.00
Tax on P15,833.00
P 1,875.00
Tax on excess (P4,167.00 x 25%) 1,041.75
W/Tax for September, 2009
P 2,916.75
EXAMPLE 4: Mr. D, married, with four (4)
qualified dependent children (ME4) receives
P10,000.00 (net of taxable items) as regular
semi-monthly compensation for the payroll
period October 16 to 30, 2009. 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 P354.17 on P9,167.00 plus 20% in excess (P10,000.00
less P9,167.00 = P833.00).
Taxable compensation
Less: Compensation Level
(Table B, Line 4, Column 5)
Excess
Tax on P9,167.00
Tax on excess (P833.00 x 20%)
W/Tax for October 16-30, 2009
P10,000.00
9,167.00
P 833.00
P 354.17
166.60
P 520.17
EXAMPLE 5: Mr. E, married with two (2)
legitimate dependent children and one (1)
legally adopted child, receives P30,000.00 (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 P1,875.00 on P22,083.00 plus 25% of the
excess (P30,000.00 less P22,083.00 = P7,917.25).
Taxable compensation
P30,000.00
Less: Compensation Level
(Table B, Line 3, Column 6) 22,083.00
Excess
P 7,917.00
Tax on P22,083.00
P 1,875.00
Tax on excess(P7,917.25 x 25%) 1,979.25
W/Tax for March,2010
P 3,854.25
EXAMPLE 6: On December, 2009, Mrs. F, married with three
(3) qualified dependent children receives P20,0000.00 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 13th month pay amounting to P15,000.00 plus
other benefits such as productivity incentive bonus (PIB) of
P10,000.00,and loyalty pay of P3,000.00. 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:
13th month pay
Productivity IB
Loyalty pay
Total Gross Benefits
P15,000.00*
10,000.00*
3,000.00*
P 28,000.00*
*NOTE: Non-taxable because the 13th month pay and other benefits
does not exceed P30,000.00.
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 P708.33
on P16,250.00 plus 20% of the excess (P20,000.00 less P16,250.00 = P3,750.00).
Taxable compensation
P 20,000.00
Less: Compensation Level
(Table B, Line 3, Column 5)
16,250.00
Excess
P 3,750.00
Tax on P16,250.00
P 708.33
Tax on excess (P3,750.00 x 20%)
750.00
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:
9269347/9269351
Or email add: [email protected]
Republic Act No. 9994, Otherwise
Known as the
"Expanded Senior Citizens Act
of 2010”
RR 7-2010
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. 10-2008 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 longterm deposit or investment
– Four years to less than five years
– Three years to less than four years
– Less than three years
— 5%
— 12%; and
— 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.
both
prescription and nonprescription medicines, and
articles approved by the BFAD-DOH, which are intended for use in
For
this
purpose,
the
term
"medicines"
shall
refer
to
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.7 For 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;
Special Discount granted to Senior
Citizens and Senior Citizens Centers.
SEC. 5.
• 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
100kwh of electricity and
– 30 m3 of water; and
–
3. the privilege is granted per household regardless
of the number of Senior Citizens residing therein.
Special Discount granted to Senior
Citizens and Senior Citizens Centers.
SEC. 5.
• 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 noneligible 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
to food purchases by senior citizens.
Combination (MEMC) shall apply
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.
2.
obituary publication and
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.
Less: 20% Discount
Amount Payable by the Senior Citizen
P50.00
10.00
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 – Cash
P40
Senior Citizen Discount Expense 10
Credit – Sales
P50
• 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
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 Citizen.
of sales,
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. 162005. 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
P50,000.00 but not exceeding P100,000.00 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
P100,000.00 but not exceeding P200,000.00 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
926-9347 / 926-9451
BIR Contact Center: (02)-981-8888
e-mail: [email protected]
Reasons Why the Government Gives Discounts to Senior
Citizens:
1.
2.
3.
4.
5.
6.
7.
FOOD – marami nang bawal.
TRANSPORTATION – nahirapan nang sumakay.
GROCERIES – ‘di na kayang buhatin.
CINEMA – malabo na ang mata.
CONCERTS – mahina na ang pandinig.
GAMOT – hindi malunok.
HOTELS – anong gagawin naman duon?
Enjoy life while you’re still young, don’t wait for
discounts.
UPDATES
1.
Revenue Regulations (RR) No. 1-2011 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. 10022 “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 2-2011: Filing of ITR with the Annual
Information Return (AIR) -(Suspended indefinitely by
RR 6-2011) but RR 19-2011 requires the use of the new
income tax returns (1700, 1701 and 1702 November 2011
version) in the filing of ITRs for CY 2011
3.
RR 5-2011: “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) 859-2009 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 P750.00 per employee per semester or P125.00
per month;
d. Rice subsidy of P1,500.00 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 P4,000.00
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. 21-2011:
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 28-2010 : Circularized RA 10026 “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. 21-2010 : 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 27-2011 (undated) : Revokes previously issued
rulings stating that all contributions to SSS, GSIS,
Medicare and Philhealth are non-taxable. “The nontaxable 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 53-2011 dated November 4, 2011 : Effectivity of
the taxability of voluntary contributions to SSS, GSIS,
Philhealth and Pag-ibig is July 1, 2011.
10.
Revenue Regulations No. 16-2011 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
unit @P10,000/month
10,000
12,800
Sec. 109(V) Sale or lease of goods
or properties
1,500,000 1,919,500
11. 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
926-9347 / 926-9451
BIR Contact Center: (02)-981-8888
e-mail: [email protected]

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