The Bureau of Internal Revenue (BIR) has released the implementing guidelines related to Withholding Taxes on Compensation Income, as mandated in the TRAIN bill signed into law by Pres. Rodrigo Duterte.
Here’s a copy of the entire BIR Revenue Regulation. You may also download below a PDF file of the said BIR RR 1-2018.
BIR Revenue Memorandum Circular No. 1-2018
Prescribes the Procedures on the use of Withholding Tax Table on Compensation Income and Advises on the Change of Creditable Withholding Tax Rate on Certain Income Payments to Individuals
Issued on: January 4, 2018
This Revenue Memorandum Circular (RMC) is issued pursuant to amendments to the National Internal Revenue Code introduced under Republic Act 10963, effective January 1, 2018, with the following objectives:
- (A) To supplement RMC No. 105-2017 dated December 28, 2017 by providing the steps on how to use the revised Withholding Tax Table on
Compensation; and - (B) To advise on the change in the Creditable Withholding Tax Rate on lncome Payments to Self-employed lndividuals or Professionals.
Revised Withholding Tax Table on Compensation Income
| REVISED WITHHOLDING TAX TABLE (version 2) | ||||||
|---|---|---|---|---|---|---|
| DAILY | 1 | 2 | 3 | 4 | 5 | 6 |
| Compensation Range | P 685 and below | P 685 - P 1,095 | P 1,096 - P2,191 | P 2,192 - P 5,478 | P 5,479 - P 21,917 | P 21,918 and above |
| Prescribed Withholding Tax | 0.00 | 0.00 + 20% over P685 | P 82.19 + 25% over P 1,096 | P 356.16 + 30% over P 2,192 | P 1,342.47 + 32% over P 5,479 | P 6,602.74 + 35% over P 21,918 |
| WEEKLY | 1 | 2 | 3 | 4 | 5 | 6 |
| Compensation Range | P 4,808 and below | P 4,808 - P 7,691 | P 7,692 - P 15,384 | P 15,385 - P 38,461 | P 38,462 - P 153,845 | P 153,846 and above |
| Prescribed Withholding Tax | 0.00 | 0.00 + 20% over P 4,808 | P 576.92 + 25% over P 7,692 | P 2,500.0 + 30% over P 15, 385 | P 9,423.08 + 32% over 38,462 | P 46,346.15 + 35% over P 153,846 |
| SEMI-MONTHLY | 1 | 2 | 3 | 4 | 5 | 6 |
| Compensation Range | P 10,417 and below | P 10,417 - P 16,666 | P 16,667 - P 33,332 | P 33,333 - P83,332 | P 383,333 - P 333,332 | P 333,333 and above |
| Prescribed Withholding Tax | 0.00 | 0.00 +20% over P10,417 | P 1,250 + 25% over P 16,667 | P 5,416.67 + 30% over P 33,333 | P 20,416.67 + 32% over P 83,333 | P 100,416.67 + 35% over P 333,333 |
| MONTHLY | 1 | 2 | 3 | 4 | 5 | 6 |
| Compensation Range | P 20,833 and below | P 20,833 - P 33,332 | P 33,333 - P 66,666 | P 66,667 - P 166,666 | P 166,667 - P 666,666 | P 666,667 and above |
| Prescribed Withholding Tax | 0.00 | 0.00 + 20% over P 20,833 | P 2,500.00 + 25% over P 33,333 | P 10,833.33 + 30% over P 66,667 | P 40,833.33 + 32% over P 166,667 | P 200,833.33 + 35% over P 666,667 |
A. Steps in the Use of the Withholding Tax Table
ln general, every employer paying compensation to its employee/s shall deduct and withhold from such compensation a tax determined in accordance with the prescribed Revised Withholding Tax Tables, version 2 (Annex “A”) shown above.
- Step 1. Determine the total amount of monetary and non-monetary compensation paid to an employee for the payroll period: monthly, semimonthly, weekly or daily, as the case may be, segregating non-taxable benefits and mandatory contributions.
- Step 2. Use the appropriate table in Annex “A” above for the applicable payroll period.
- Step 3. Determine the compensation range of the employee and apply the applicable tax rates prescribed thereon.
- Step 4. Compute the withholding tax due by adding the tax predetermined in the compensation range indicated on the column used and the tax on the excess of the total compensation over the minimum of the compensation range.
Sample Computations Using the Withholding Tax Tables
The following are sample computations of withholding tax on compensation using the prescribed withholding tax tables:
Example 1. An employee receiving daily compensation in the amount of P2,500.00, net of mandatory contributions.
Computation:
By using the daily withholding tax table, the withholding tax beginning January 2018 is computed by referring to compensation range under column 4 which shows a predetermined tax of P356.16 on P2,192.00 plus 30% of the excess of Compensation Range (Minimum) amounting to P308.00 (P2,500.00 – P2,192.00) which is P92.40. As such, the withholding tax to be withheld by the employer shall be P448.56.
| Total taxable compensation | P 2,500.00 |
| Less: Compensation Range (Minimum) | (2,192.00) |
| Excess | = P 308.00 |
| Withholding tax shall be computed as follows | |
| Predetermined Tax on P2,192.00 | P356.16 |
| Add: Tax on the excess (P308.00 x 30%) | 92.4 |
| Total daily withholding tax | P 448.56 |
Example 2: An employee receiving weekly compensation in the amount of P9,500.00, net of mandatory contributions.
Computation:
By using the weekly withholding tax table, the withholding tax beginning January 2018 is computed by referring to compensation range under column 3 which shows a predetermined tax of P576.92 on P7,692.00 plus 25% of the excess of Compensation Range (Minimum) amounting to P1,808.00 (P9,500.00 – P7,692.00) which is P452.00. As such, the withholding tax to be withheld by the employer shall be P1,028.92.
| Total taxable compensation | P 9,500.00 |
| Less: Compensation Range (Minimum) | (7692.00) |
| Excess | = P 1,808.00 |
| Withholding tax shall be computed as follows | |
| Tax on P 7,692.00 | P 576.92 |
| Tax on the excess (P 1,808.00 x 25%) | 452.00 |
| Total daily withholding tax | = P 1,028.92 |
Example 3: An employee receiving semi-monthly compensation in the amount of P15,500.00, net of mandatory contributions.
Computation:
By using the semi-monthly withholding tax table, the withholding tax beginning January 2018 is computed by referring to compensation range under column 2 which shows a predetermined tax of P0.00 on P10,417.00 plus 20% of the excess of Compensation Range (Minimum) amounting to P5,083.00 (P15,500.00 – P10,417.00) which is P1,016.60. As such, the withholding tax to be withheld by the employer shall be P1,016.60.
| Total taxable compensation | P 15,500.00 |
| Less: Compensation Range (Minimum) | (10,417.00) |
| Excess | = P 5,083.00 |
| Withholding tax shall be computed as follows | |
| Tax on P 10,417.00 | P 0.00 |
| Tax on the excess (P 5,083.00 x 20%) | 1,016.60 |
| Total daily withholding tax | = P 1,016.60 |
Example 4: An employee receiving monthly compensation in the amount of
P170,500.00 with supplemental compensation in the amount of P5,000.00, net of mandatory contributions.
Computation:
By using the monthly withholding tax table, the withholding tax beginning January 2018 is computed by referring to compensation range under column 2 which shows a predetermined tax of P40,833.33 on P166,667.00 plus 32% of the excess of Compensation Range (Minimum) amounting to P8,833.00 (P170,500.00 + P5,000 – P166,667.00) which is P2,826.56. As such, the withholding tax to be withheld by the employer shall be P43,659.89.
| Total taxable compensation | P 170,500.00 |
| Less: Compensation Range (Minimum) | (166,667.00) |
| Excess | = P 3,833.00 |
| Add: Supplemental Compensation | + 5,000.00 |
| Total Taxable Compensation for the month | = P 8,833.00 |
| Withholding tax shall be computed as follows | |
| Tax on P 166,667.00 | P 40,833.33 |
| Tax on the excess including supplemental compensation (P 8,833.00 x 32%) | 2,826.56 |
| Total daily withholding tax | = P 43,659.89 |
B. Change in the Creditable Withholding Tax Rate on Income Payments to Self-employed Individuals or Professionals
The following lncome Payments to Self-employed lndividuals or Professionals shall be subject to Eight Percent (8%):
- 1. Professional fees, talent fees, commissions, etc. for services rendered by
individuals; - 2. lncome distribution to beneficiaries of Estates and Trusts;
- 3. lncome Payment to certain brokers and agents;
- 4. lncome Payments to partners of general professional partnership;
- 5. Professional fees paid to medical practitioners; and
- 6. Commission of independent and/or exclusive sales representatives, and marketing agents of companies.
All internal revenue officials, employees and other concerned are hereby
enjoined to give this Circular as wide publicity as possible.
Download here an official PDF copy of BIR Revenue Memorandum Circular No. 1-2018
Source: Bureau of Internal Revenue (BIR), Department of Finance Philippines (DOF)
