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How to Compute Withholding Tax in the Philippines 2023

How is withholding tax calculated in the Philippines?

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Written By Editorial Team

Editorial Team of Metaverse VR Now

October 17, 2022

If you came here to know how to compute withholding tax Philippines, you first need to have a BIR Tax Table because you will be looking at it later in the process. Also, the withholding tax varies due to three factors: monthly salary, status, and the number of dependents.

How to Compute Withholding Tax in the Philippines

Here are simple steps on how to compute withholding tax in the Philippines.

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Step 1: Know the three factors

The first step is about determining the three factors:

Monthly Salary:

The figure should not include your overtime pay / monetary value of your late / tardiness and holiday pay, but rather your monthly allowance.

Status:

Single or Married

Dependents:

The number of dependents/children

Example:

Employee Juan dela Cruz has a monthly pay of 12,000

Employee Juan dela Cruz is married

Employee Juan dela Cruz has one child

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Step 2: Determine your taxable income

Taxable income refers to the amount of money that is the subject of taxation. Taxable income can be calculated using the following formula:

Taxable Income = Gross Taxable Earnings – Non Taxable Deductions

whereas:

Gross taxable earnings include monthly salary, night differential, overtime pay, holiday pay, and taxable allowances

Non-taxable deductions include absences, tardiness deductions, SSS contributions, PhilHealth contributions, and HDMF contributions.

Example:

Employee Juan dela Cruz pays:

  • SSS- 436 PHP
  • Pag-IBIG- 150 PHP
  • PhilHealth- 100 PHP

Employee Juan dela Cruz’s taxable income is:

Taxable Income

= 12,000 – (436 + 150 + 100)

= 12,000 – (686)

= 11,314

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Step 3: Determine the tax table schedule

The next step is to know the tax table schedule using the BIR Tax Table. Employers typically use “Semi-Monthly” or “Monthly.”

Say, for example, Employee Juan dela Cruz’s scheduled payroll is monthly, so her tax table schedule will be “Monthly.”

Step 4: Determine tax status

After knowing your tax table schedule, find out what your tax status is.

For instance, Employee Juan dela Cruz is married and with one dependent, so she falls under tax status “ME1” and will use “Table B” for the following step.

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Step 5: Know your compensation level

For this step, you should again look at your Taxable Income and Tax Status.

For example, Employee Juan dela Cruz’s tax status is “ME1,” look for “ME1,” and from there, go to the compensation row. Then, look for the highest amount that DOES NOT surpass the taxable income. Employee Juan dela Cruz’s compensation level is PHP 8,750.

Step 6: Look for the base tax and percentage over

After that, look for the base tax and percentage in the BIR Tax Table that is aligned with your compensation level.

Employee Juan dela Cruz has a PHP 8,750 compensation level, so her Base Tax is PHP 208.33, and the percentage over is 15%.

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Step 7: Calculate withholding tax

Now, this is how to compute withholding tax Philippines- use the following formula:

Withholding Tax

= [(Taxable Income – Compensation Level) x Percentage Over] + Base Tax

Let’s take Employee Juan dela Cruz’s situation as an example:

Withholding Tax

= [(11,314 – 8,750) x 0.15] + 208.33

= [(2564) x 0.15] + 208.33

= 384.6 + 208.33

= 592.93

How much is withholding tax of an employee who receive ₱ 10000 monthly?
How to Compute Withholding Tax in the Philippines 2023 – APAC Monetary

Withholding Tax Calculator

If this is your first time filing a withholding tax, we suggest using a withholding tax calculator from BIR. Here is a sample of how to compute withholding tax in the Philippines using the BIR tax calculator.

FAQs About Withholding Tax Calculations in the Philippines

In the Philippines, withholding tax is a type of tax that is deducted from income that is paid to an individual by an employer. The amount of tax withheld is based on the individual’s tax rate. A withholding tax is used to collect taxes from individuals who may not otherwise pay their taxes on time. Withholding tax is also used to help ensure that individuals pay the correct amount of tax.

The Philippines imposes a withholding tax (WHT) on certain income payments to Filipino residents and non-residents. The tax is typically withheld by the payer and remitted to the government. Withholding tax rates vary depending on the type of income and the country of residence of the recipient. This article provides an overview of withholding taxes in the Philippines, including rates and exemptions.

With Creditable Withholding Tax (BIR FORM 2307) How do I calculate 2307 withholding?
How to Compute Withholding Tax in the Philippines 2023 – APAC Monetary

What is withholding tax?

Almost all employees are required to have taxes withheld from their paychecks. Withholding tax is an advance payment of your income tax. The amount withheld is based on the amount of income you earn and the number of withholding allowances you claim.

The purpose of withholding tax is to make sure that you pay at least some of your annual income tax bill throughout the year rather than having to pay it all at once when you file your return. When you have taxes withheld from your paycheck, the money goes directly to the government, which reduces the amount of tax you owe when you file your return.

Withholding tax is not a perfect system, however. You may still owe taxes when you file your return if you’ve had too few taxes withheld during the year. Conversely, if too much has been withheld, you’ll get a refund when you file your return.

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Who should pay a withholding tax in the Philippines?

When it comes to paying a withholding tax in the Philippines, there are a few things that you need to know. For starters, withholding tax is a tax that is deducted from an employee’s salary. The amount of tax that is deducted depends on the employee’s taxable income.

The employer is responsible for deducting the withholding tax from the employee’s salary and remitting it to the Bureau of Internal Revenue (BIR). However, there are some cases where the employee may be required to pay the withholding tax directly to the BIR.

Generally, employees who are considered “high-risk” taxpayers will be required to pay their withholding tax directly to the BIR. This includes employees who have multiple sources of income, or those who receive high salaries.

How to Calculate Withholding Tax: A Simple Payroll Guide for Small
How to Compute Withholding Tax in the Philippines 2023 – APAC Monetary

Who should withhold tax in the Philippines?

The Philippines has a progressive income tax system. This means that the higher your income, the higher your tax rate. The first step in computing your income tax is to determine your taxable income. This is the total of all your incomes from all sources, minus any allowable deductions and exemptions.

Your taxable income is then taxed at the applicable marginal tax rate. The marginal tax rates for individuals range from 5% to 32%.

How is the tax rate determined?

The tax rate is determined by the Tax Code of the Philippines. The code states that the tax rate shall be based on the taxpayer’s income, which is taxed at a progressive rate. The tax rate for each bracket is as follows: 5% for those earning up to P10,000; 10% for those earning P10,001 to P30,000; 15% for those earning P30,001 to P70,000; 20% for those earning P70,001 to P140,000; 25% for those earning more than P140,000.

The tax rate is determined by the amount of income you earn. If you earn more than the tax-free threshold, you will pay taxes at the marginal tax rate. The marginal tax rate is the rate of tax you pay on your next income.

Withholding Taxes in the Philippines: What You Should Know
How to Compute Withholding Tax in the Philippines 2023 – APAC Monetary

What are the common types of income subject to withholding tax?

There are four common types of income subject to withholding tax in the Philippines: compensation, royalties, prizes and winnings, and interest.

Compensation includes salaries, wages, allowances, and other forms of remuneration received by an individual in connection with their employment. Royalties refer to payments made for the use of patents, copyrights, trademarks, and other similar intangible property rights. Prizes and winnings include lottery winnings, raffle prizes, and other amounts won in games of chance. Interest refers to payments made on loans, deposits, or other debt instruments.

Withholding tax is required to be withheld from all four types of income at the time they are received. The withholding tax rate varies depending on the type of income and the amount received. For compensation income, the withholding tax rate is 10% for amounts up to PHP 30,000 per month.

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Do I need to file a return?

If you’re an employee in the Philippines, you’re required to file a return if your annual income exceeds PHP 160,000. If you’re self-employed or earn income from investments, you must file a return if your annual income exceeds PHP 30,000. Filing a tax return is also mandatory if you’ve made any taxable gifts or inheritances during the year.

For most employees in the Philippines, filing a tax return is a simple matter of providing your employer with your Taxpayer Identification Number (TIN) and completing a short form. Your employer will withhold the appropriate amount of tax from your salary and remit it to the Bureau of Internal Revenue (BIR).

If you’re self-employed or earn income from investments, you’ll need to file a quarterly estimated tax return and make payments throughout the year.

Withholding Taxes in the Philippines: What You Should Know
How to Compute Withholding Tax in the Philippines 2023 – APAC Monetary

When is the tax due?

The tax rates range from 5% to 32%, and the tax is due on April 15 of each year.

If you are an employee, your employer is responsible for withholding taxes from your paycheck and remitting them to the government. If you are self-employed, you are responsible for paying your taxes yourself.

There are a few different ways to pay your taxes in the Philippines. You can pay in cash at any authorized bank or payment center, or you can pay online via the Bureau of Internal Revenue’s eFPS system.

How do I pay my withholding tax?

If you’re an employee in the Philippines, you’re required to pay withholding tax. Here’s everything you need to know about how to pay your withholding tax.

Withholding tax is a percentage of your income that is deducted by your employer and paid to the government. The amount of withholding tax depends on your income and your filing status.

You can pay your withholding tax online or at a bank. To pay online, you’ll need to register for an account with the Bureau of Internal Revenue. Once you’ve registered, you can log in and make a payment. To pay at a bank, you’ll need to fill out a Withholding Tax Return form and take it to the teller.

If you have any questions about how to pay your withholding tax, contact the Bureau of Internal Revenue or speak to your employer.

How many percent is withholding tax in the Philippines?
How to Compute Withholding Tax in the Philippines 2023 – APAC Monetary

Which tax forms should Filipino taxpayers use?

Here are the different types of tax forms based on BIR guidelines. This includes withholding tax forms.

WITHHOLDING TAX FORMS DESCRIPTION
REGISTRATION FORM
BIR FORM NO. 1901 Registration for Self-Employed and Mixed Income Individuals, Estates and Trusts Application Form
BIR FORM NO. 1902 Registration for Individuals Earning Purely Compensation Income and Non-Residnet Citizens/Resident Alien Employee Application Form
BIR FORM NO. 1903 Registration for Corporations/Partnerships (Taxable/Non-Taxable), including GAI’s and LGU’s Application Form
BIR FORM NO. 1904 Registration for One-time Taxpayer and Persons Registering under E.O. 98 (Securing a TIN to be able to transact with any government office) Application Form
BIR FORM NO. 1905 Information Update Application Form
DIFFERENT PAYMENT FORMS FROM BIR
BIR FORM NO. 0605 Payment form
BIR FORM NO. 0619-E Monthly Remittance Form of Creditable Income Taxes Withheld (Expanded)
BIR FORM NO. 0619-F Monthly Remittance Form of Final Income Taxes Withheld
DIFFERENT REMITTANCE FORMS FROM BIR
BIR FORM NO. 1600-VT Monthly Remittance Return of Value-Added Tax
BIR FORM No. 1600-PT Monthly Remittance Return of Percentage Tax
BIR FORM NO. 1600WP Remittance Return of Percentage Tax on Winnings and Prizes Withheld by Race Track Operators
BIR FORM NO. 1601-C Monthly Remittance Return of Income Taxes Withheld on Compensation
BIR FORM NO. 1601-EQ Quarterly Remittance Return of Creditable Income Taxes withheld (Expanded)
BIR FORM NO. 1601-FQ Quarterly Remittance Return of Final Income Taxes Withheld
BIR FORM NO. 1602-Q Quarterly Remittance Return of Final Taxes Withheld on Interest Paid on Deposits and Deposits Substitutes/Trusts/Etc.
BIR FORM NO. 1603-Q Quarterly Remittance Return of Final Income Taxes Withheld on Fringe benefits Paid to Employees Other Than Rank and File
DIFFERENT CERTIFICATES FROM BIR
BIR FORM NO. 2304 Certificate of Income Payment Not Subject to Withholding Tax (Excluding Compensation Income)
BIR FORM NO. 2306 Certificate of Final Tax Withheld at Source
BIR FORM NO. 2307 Certificate of Creditable Tax Withheld at Source
BIR FORM NO. 2316 Certificate of Compensation Payment/Tax Withheld

Note: The above Tax matrix forms may change without prior notice from BIR.

Conclusion: How to Compute Withholding Tax in the Philippines?

In conclusion, to compute withholding tax in the Philippines, you will need to know your tax rate, calculate your taxable income, and then multiply it by your tax rate. Withholding tax is an important part of the Philippine tax system, and understanding how to compute it is essential for anyone who wants to stay compliant with the law set by the Bureau of Internal Revenue (BIR).

Computing withholding tax in the Philippines is a relatively simple process that can be completed by following the steps outlined in this article. Withholding tax is an important part of ensuring that taxpayers are compliant with the Philippine government’s tax laws, and it is therefore important to understand how to correctly compute withholding tax.

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