WITHHOLDING TAX ON

COMPENSATION
Revenue Regulations No. 11-2018

Presented By;
Ms. Erlinda SD. Pantanilla
Tax Consultant
Withholding Tax Amendments

The BIR issued Revenue Regulations (RR) No. 11-

2018 amending the provisions of RR 2-98 to
implement further the provisions of Republic Act
No. 10963 of the Tax Reform for Acceleration and
Inclusion (TRAIN) Law.
Withholding Tax on Compensation
The amendments on Withholding Tax on
Compensation relate to the following, among
others:

1.) Changes in the manner and time of filing the

withholding tax returns (BIR Form No. 1603 for
final tax withheld on fringe benefits)
Withholding Tax on Compensation
The amendments on Withholding Tax on
Compensation relate to the following, among
others:

2.) Adjustment on the thresholds for certain de

minimis benefits not subject to income tax as well
as withholding tax on compensation.
Withholding Tax on Compensation
The amendments on Withholding Tax on
Compensation relate to the following, among
others:

3.) Increase in the amount of tax-exempt 13th

month pay and other benefits to Php 90,000
 1. Changes in the manner and
time of filing the withholding tax
returns (BIR Form No. 1603 for
final tax withheld on fringe
benefits)
Changes in the manner and filing of
withholding tax returns on Fringe Benefits

Filing of Form 1603

- Not later than the last day of the month
following the close of the quarter during which
the withholding was made. (quarter should
follow the calendar quarter)

- Attachment to Form 1603 – Quarterly

Alphabetical List of Payees (QAP)
Changes in the manner and filing of
withholding tax returns on Fringe Benefits
Filing of Form 0619F – monthly remittance is still
required to deposit the tax held in trust by
withholding agent (employer)

Deadlines:
eBIR Forms System – every 10th of the following
month when withholding was made/ required

eFPS – every 15th of the following month when

withholding was made/ required
Changes in the manner and filing of
withholding tax returns on Fringe Benefits
New rate of Fringe Benefit Tax: 35% of Grossed up
monetray value

To get the grossed up value

= actual monetary value/ 65%

Result X 35%
2. Adjustment on the thresholds
for certain De Minimis benefits
not subject to income tax as well
as withholding tax on
compensation.
Increase in the amount of tax-exempt
de minimis benefits
De Minimis Benefit Tax-exempt Threshold
Old New
Medical cash allowance Php 750 per employee Php 1,500 per
to dependents of per semester, or Php employee per
employees 125 per month semester or Php 250
per month
Rice subsidy Php 1,500 or one sack Php 2,000 or one sack
of 50 kg. rice per of 50 kg. rice per
month amounting to month amounting to
not more than Php not more than Php
1,500 2,000

Uniform and clothing Php 5,000 per annum Php 6,000 per annum
allowance
Summary of De Minimis Benefits

a. 10 days monetized unused vacation leave credits

b. Monetized value of VL and SL paid to government officials and
employees
c. Medical cash allowance not exceeding Php 1,500 per semester
or Php 250 a month
d. Rice subsidy of Php 2,000 or one sack of rice or 50-kgs per
month
e. Uniform and clothing allowance not exceeding Php 6,000 per
annum
f. Medical benefits not exceeding Php 10,000
Summary of De Minimis Benefits

g. Laundry allowance of Php 300 per month

h. Employee achievement awards in the form of tangible personal

property other than cash or gift certificate with an annual monetary
value not exceeding Php 10,000 received by the employee under an
established written plan.

i. Flowers, fruits, books or similar items given to employees under

special circumstances, e.g. on account of illness, marriage, birth of
a baby, etc.
Summary of De Minimis Benefits

j. Daily meal allowance for overtime work not exceeding 25% of the
basic minimum wage

k. Gifts given during Christmas and major anniversary celebrations

not exceeding Php 5,000 per employee per annum

l. Benefits received by an employee by virtue of a collective

bargaining agreement (CBA) and productivity incentive schemes
provided that monetary value from both CBA and productivity
incentive schemes combined do not exceed Php 10,000 per
employee per taxable year
To illustrate, the following tax rules may apply to all income
received by an employee:

Nature of Compensation/ Benefits Tax Rate

Salaries & Wages Income Tax Rate
De Minimis Benefits (DMB) Exempt
Excess of DMB (add with 13th month Pay Exempt
and Bonuses up to Php 90,000)
Benefits & Bonuses in excess of Php
90,000
Rank and File Income Tax Rate
Managerial & Supervisory Fringe Benefit Tax rate
All Other Benefits Income Tax rate
3. Increase in the amount of
tax-exempt 13th month pay
and other benefits to Php 90,000
Increase in the amount of exemption
Exemption on Withholding Tax on Compensation
(Should not exceed Php 90,000)

• 13th month pay

• Other benefits ( Christmas bonus, productivity
incentives, loyalty award, gift in cash or in kind,
additional compensation allowance
Withholding Tax on Compensation
Withholding Tax on Compensation

Compensation means all remuneration for services

by an employee for his employer under an
employer-employee relationship unless specifically
excluded by the code.
Withholding Tax on Compensation
What constitutes compensation income?
• Salaries
• Wages
• Emoluments and honoraria
• Allowances
• Fees
• Taxable bonuses and fringe benefits
• Taxable pensions and retirement pay
• Other income of a similar nature
Withholding Tax on Compensation
Exemption on Withholding Tax on Compensation

• GSIS, SSS, Medicare, PAGIBIG contributions,

union dues of individual employees
• Compensation during the year not exceeding
Php 250,000
Fringe Benefits
• Housing
• Expense account
• Vehicle of any kind
• Household personnel, such as maid, driver and
others
• Interest on loan at less than market rate to the
extent of the difference between the market rate
and actual rate granted
Fringe Benefits
• Expenses for foreign travel
• Hoiiday and vacation expenses
• Education assistance to the employee or his
dependents
• Life or health insurance and other non-life
insurance premiurns cr similar amounts in excess
of what the law allows
Minimum Wage Earners (MWEs)
MWEs receiving other income from other sources in
addition to compensation income, such as income
from other concurrent employers, from the conduct
of trade, business, or practice of profession, except
income subject to final tax, are subject to income
tax only to the extent of income other than the
Statutory Minimum Wage, holidays pay, overtime
pay, night shift, differential pay, and hazard pay
during the taxable year.
Note:

Any reduction or diminution of wages for purposes

of exemption from income tax shall constitute
misrepresentation and therefore, shall result to the
automatic disallowance of expense on the part of
the employer. The offenders may be criminally
prosecuted under existing laws.
Withholding Tax on Compensation

Illustrations on inclusion and exclusion of taxable

income payments to employees
Illustration 1
Mr. CSO, a MWE, works for G.O.D., Inc. He is not engaged in business nor
has any other source of income other than his employment. For 2018, Mr.
CSO earned a total compensation income of Php 135,000.

The TP contributed to the SSS, Philhealth, and HDMT amounting to Php

5,000 and has received 13th month pay of Php 11,000. His income tax liability
will be computed as follows:

Computation of Income Tax Liability

Total Compensation Income 135,000
Less: Mandatory Contributions 5,000
Non-Taxable Benefits 11,000 16,000
Taxable Income 119,000

*TP is exempt since he is considered a minimum income earner.

Illustration 2
The following year, Mr. CSO earned, aside from his basic wage, additional
pay of Php 140,000 which consists of the overtime pay – Php 80,000, night
shift differential – Php 30,000, hazard pay – Php 15,000 and holiday pay Php
15,000. He has the same benefits and contributions as in Illustration 1.

Computation of Income Tax Liability

Total Compensation Income 135,000
Add : Overtime, night shift differential, 140,000
hazard and holiday pay
Total Income 275,000
Less: Mandatory Contributions 5,000
Non-Taxable Benefits 11,000 16,000
Net Taxable Income 259,000
Tax Due EXEMPT
Illustration 3

Employer: CSO Corporation

Employee: Ms. Alona
2018 Compensation Received
SMW received inclusive of 175,000
13th month pay
Overtime Pay 40,000
Night Shift Differential 25,000
Commission Income 20,000
Total Income Received 260,000
Illustration 3

Computation of Income Tax Due

Total Income Received 260,000
Less: Income exempt from tax
Basic SMW 175,000
Overtime Pay 40,000
Night Shift Differential 25,000
Total Exempt Income as MWE 240,000
Taxable Income - Commission 20,000

Tax Due on not over 250,000 0.00

(20,000 X 0%)
Individuals Required to File ITR –
Form 1700

• Individual with 2 or more employers must file

ITR
Individuals Not Required to File ITR –
Form 1700

• Pure compensation earner whose taxable income

does not exceed Php 250,000
• Individual correctly withheld by employer
• Individual whose sole income has been
subjected to final withholding tax
• Minimum Wage Earner (MWE) whose Certificate
of Withholding tax was filed by the employer and
duly stamped “Received” by BIR