THE WITHHOLDING

TAX SYSTEM
 The withholding tax system
The withholding of tax is a system used to collect
tax in advance. 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
 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 P5,000.00 per annum
(rr8-2012)
•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
P10,000.00 per year
 DE MINIMIS BENEFITS
•Laundry allowance- not exceeding P300.00/month
•• Employees achievement awards – for length of service or
safety achievement which must be in the form of a personal
tangible property other cash or gift certificate with an
annual monetary value not exceeding P10,000.00 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
•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 26-
2011)

Any amount received by the employee on

account of dismissal is taxable [Section 2.78.1(B)(b),
RR 2-98
 22

Annualized
Withholding Tax
(Year-End-
Adjustment)
 Annualized Withholding Tax 23
(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.
 Annualized Withholding Tax or the 24
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;
 Annualized Withholding Tax 25
(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)
 Annualized Withholding Tax 26
(Year-End-Adjustment)

STEP 4 - Deduct the amount of premium payments on

Health and or Hospitalization Insurance of
employees who have presented evidence that
they paid the same during the taxable year.

NOTE: The deductible amount shall not exceed P 2,400/

annum or P 200/month whichever is lower and the
total family gross income does not exceed
P 250,000 for the calendar year. The employee is
required to furnish employer with copies of policy
contract and proof of payments before the
employer does the year-end adjustment.
 Annualized Withholding Tax 27
(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

 28
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.
 Year-End Adjustment - Formula
29
GROSS COMPENSATION INCOME (previous + present employer) Pxxx
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 xxxx
GROSS TAXABLE COMPENSATION INCOME Pxxx
Less: Total Exemptions P xxx
Premium paid on Health or Hospitalization
Insurance (Maximum of P2,400.00) xxx xxx
Taxable Compensation Income Pxxx

Tax Due: Refer to Annualized Tax Table, Section 24(A), Tax Code Pxxx
Less: Tax Withheld (Jan. to November, from previous & present employer) xxx
Amount to be withheld in December /refunded on Jan. 25 ff year Pxxx
 Annualized Withholding Tax 30
or the Year-end Adjustment

RESULTS OF THE YEAR-END ADJUSTMENT:

COLLECTIBLE: Tax Due > Tax Withheld ----collect before

payment of last wage/compensation

REFUNDABLE: Tax Due < Tax Withheld ----- refund on or before

Jan. 25th of the ff. year/last payment of wages

BREAK-EVEN: Tax Due = Tax Withheld ----- do not withhold

from December salary
 Sample Problem 1 31

Mr. Dexter, single receives P 25 ,000 (net of

SSS, Philhealth, HDMF and other non-taxable
items of gross income) as monthly regular
compensation starting January 1, 2009, he filed
his resignation effective June 30, 2009. The tax
withheld from January to May was
P15,000.00
 Sample Problem 1 32

Computation:
Total compensation received from January 1 to May 31, 2009 P 125,000.00
Add: Compensation to be received on June 25,000.00
Gross Compensation Jan. – June, 2009 P150,000.00
Less: Personal Exemption 50,000.00
Taxable Compensation P 100,000.00

Tax Due * P 14,500.00

Less: Tax Withheld from Jan. to May 15,000.00
Excess tax withheld to be refunded by employer P 500.00
on or before June 30, 2009 of the current year

* Tax Due on P70,000.00 P 8,500.00

Tax on excess (P30,000 x 20%) 6,000.00
Tax on P23,000 P 14,500.00
 Sample Problem 2 33

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.) P 275,000.00

Add: Compensation to be received in Dec. 25,000.00
Gross Compensation Income P 300,000.00
Less: Personal Exemption - Married P 50,000
Additional Exemptions - 2 x P25,000 50,000 P100,000.00
Taxable Compensation Income P200,000.00

Tax Due* P 37,500.00

Less Tax Withheld from Jan. to Nov. 35,000.00
To be withheld from employee’s December salary P 2,500.00

Tax on P140,000.00 P22,500.00

Tax on excess (P60,000.00 x 25%) 15,000.00
*TAX DUE P37,500.00
 Employers are REQUIRED to file Annual Information
34 of
Return (BIR Form 1604CF) and the Alphabetical List
Employees

FOR NON-EFPS FILERS:

1. Manual Submission - 3 copies of BIR Form 1604-CF and the

alphabetical list of employees (hard

and soft copy).

FOR EFPS FILERS: Submit through e-submission or any other

required
e-filing systems
 Employers are required to submit the
35
ANNUAL INFORMATION RETURN OF INCOME
TAXES WITHHELD ON COMPENSATION AND
FINAL WITHHOLDING TAXES (BIR Form No. 1604-
CF) and the ALPHABETICAL LIST OF EMPLOYEES

• WHEN : On or before January 31of the

following year

• WHERE: RDO, LTDO, LTS

 Substituted Filing of 36
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.
Individuals Qualified for Substituted Filing and are not
required to file BIR Form No. 1700 37
(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).
 38
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.
 Individuals NOT qualified for substituted filing
and MUST file BIR Form no. 1700 39

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.
 Individuals NOT qualified for substituted
filing and MUST file BIR Form no. 170040

4. Individuals deriving other non-business, non-profession-

related income in addition to compensation income not
otherwise subject to a final tax.

5. Individuals receiving purely compensation income from a

single employer whose income tax has been correctly
withheld but whose spouse does not qualify for substituted
filing.

6. Non-resident aliens engaged in trade or business in the

Philippines deriving purely compensation income or
compensation income and other non-business, non-
professional-related income.
Individuals NOT qualified for substituted
41
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
Certificate of Income and Tax Withheld on
Compensation (BIR Form No. 2316) 42

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

 Certificate of Income and Withheld on
Compensation (BIR Form 2316) 43
In case of successive employment:

The employee is required to furnish his new

employer with his duly certified copy of the
Certificate issued by the previous employer,
both within the taxable year.
 Uses of BIR Form No. 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.

 45

EXPANDED
WITHHOLDING
TAX
 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.
 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 2-98/6-2001) - 5%

E. Income payments to contractors - 2%

(RR 2-98/6-2001/14-2002/17-2003)
 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 2-98/6-
2001/17-2003)
 - 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 - 1%
Services - 2%
 INCOME PAYMENT
N. Income payments by government (RR 2-98/6-2001/14-
2002/17-2003/30-2003)
Goods - 1%
Services - 2%

O. Commission of independent and exclusive

distributors, medical, technical and sales
representatives and marketing agents of multi-level
marketing companies (RR 2-98/17-2003) - 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 (RR 14-2002)
- 1%

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 ser-
vices 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)
FINAL
WITHHOLDIN
G TAX
 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 Value of the benefit (VB)
which is the usual place of shall be the amount of
residence of the employee rental paid by the Er (per lease
contract). The Monetary Value
(MV) is 50% of VB.
FINAL WITHHOLDING TAX
A. FBT – Housing
Fringe Benefit Valuation

1. b. Er owns residential property and Annual VB is 5% of the market

the same is assigned for the use value of land and improvement.
of his employee as his usual The MV shall be 50% of the VB.
place of residence MV = [5%(FMV or ZV] x 50%

c. Er purchases residential property Annual VB is 5% of acquisition

on installment basis and allows cost, exclusive of interest. MV
Ee to use the same as his usual is 50% of the VB.
place of residence
 FINAL WITHHOLDING TAX

A. FBT – Housing
Fringe Benefit Valuation
1. d. If Er purchases residential property MV shall be entire value
and transfers ownership in the name of the benefit
of Ee, the VB shall be the Er’s acqui-
sition cost or ZV

e. If Er purchases a residential property VB shall be the difference

& transfers ownership to Ee for his between the FMV or ZV
residential use, at a price less than the and the cost to the Er.
Er’s acquisition cost 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

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, VB is the acquisition

the ownership of which is placed
cost exclusive of in the name of the
Ee interest, divided by 5 years. MV of FB
is the entire value of the benefit (regardless it is
used by Ee partly for personal purpose and partly for Er’s benefit.
 FINAL WITHHOLDING TAX
• A. FBT - MOTOR VEHICLE
Fringe Benefit Valuation
3. d. Er shoulders portion of the VB is the amount
amount of the purchase price shouldered by Er. MV
of the vehicle the ownership is the entire value of FB
of which is placed in the (regardless if it is used by Ee partly for name
of the Ee. personal purpose and partly for the benefit of the Er)

e. Er owns & maintains a fleet VB is the acqusition cost of

of motor vehicles for the use all vehicles NOT normally
of the business and employees used for
sales, freight, deli- very service and
other non-
personal use divided by 5 yrs.
MV of FB is 50% of VB or
MV = [(AC/5] x 50%
 FINAL WITHHOLDING TAX
• A. FBT - MOTOR VEHICLE
Fringe Benefit Valuation
3. f. Er leases & maintains a fleet VB is the amount of
of motor vehicles for the use
rental payments for of the
business & employees vehicles not normally
used for sales, freight,
delivery, service and
other non-personal use.
MV is 50% of VB

g. Use of aircraft (including helicopters) owned and

maintained by Er shall be treated as business use and
 FINAL WITHHOLDING TAX
A. FBT - MOTOR VEHICLE
Fringe Benefit Valuation
3. h. Use of yacht, whether owned VB is measured based
and maintained or leased by
on the depreciation of the Er, shall
be treated as the yacht at an estima- taxable FB.
ted 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
 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 $300.00 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 EXPENSES- Holiday and vacation
expenses of the employee borne by his employer shall be
treated as taxable FB.
FINAL WITHHOLDING TAX

A. FBT - 9. EDUCATIONAL ASSISTANCE

TO Ee OR HIS DEPENDENTS
9. a. Educational assistance which are borne
by the Er is taxable FB except if the grant is
directly connected with the Er’s trade, business
or profession and there is a written contract that
Ee shall remain in the employ of Er for a period
of time they have mutually agreed upon.
 FINAL WITHHOLDING TAX
A. FBT - 9. EDUCATIONAL ASSISTANCE TO Ee OR HIS
DEPENDENTS

9. b. The educational assistance extended by the Er to

the dependents of the Ee shall be treated as
taxable FB unless the assistance was provided
through competitive scheme under the scholarship
program of the company.
FINAL WITHHOLDING TAX
A. FBT - 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. - - - - - - - 20%
b. Interest under the Foreign Currency
Deposit System - - - - - - - - - - - - - - - - - - - - 7.5%
c. Royalties - - - - - - - - - - - - - - - - - - - - - - - - 20%
d. Royalties on books, literary works and musical
arrangements - - - - - - - - - - - - - - 10%
e. Prizes (except amounting to P10,000 or less) - - - - - - - - 20%
f. Winnings (except PCSO & Lotto) - - - - - - - - - - - - 20%
 FINAL WITHHOLDING TAX

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:

Rate
1. Cash and/or property dividends, interest, 20%
royalties, prizes (except amounting to P10,000 or less),
winnings (except PCSO & Lotto)
2. Royalties on books, literary works and 10%
musical compositions
3. Cinematographic films and similar work 25%
 FINAL WITHHOLDING TAX
2. Payment to Non-resident Alien Individual:
a. Engaged in trade or business within the Phils:
4. Interest income from pre-termination
of certificate of long-term deposit:
4 years to less than 5 years - - - - - - - - - - - 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, emolumentsor 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/LTS-NO.
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
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 16-2005 (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)
GOVERNMENT MONEY PAYMENT
TRANSACTIONS SUBJECT TO PERCENTAGE TAX:

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

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

6. Finance companies
b. On interest, commissions and discounts from lending
activities, as well as financial leasing based on the
remaining maturity of the instruments from which
such receipts are derived:
- Short term maturity (2 years below) 5%
- Medium-term (over 2 yrs but not exceeding 4 yrs) 3%
- Long-term maturity:
Over 4 yrs but not exceeding 7 years 1%
Over 7 years 0%
GOVERNMENT MONEY PAYMENT

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. [Sectio

5.116(A)8(B), RR 2-98] 5%
GOVERNMENT MONEY PAYMENT

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

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% 4%

- Over 25% but nor exceeding 33 1/3% 2%
- Over 33 1/3% 1%
GOVERNMENT MONEY PAYMENT

TRANSACTIONS SUBJECT TO CREDITABLE VAT:

B. VAT PAYEES
1. Purchase of Goods & Services 5%
2. Payment for lease or use of
properties or property rights
to non-resident owners 12%
GOVERNMENT MONEY PAYMENT
3. Payment for services rendered to local
insurance companies with respect to
reinsurance premiums payable to non-resident
insurance or reinsurance companies; - 12%
and

4. Services rendered in the Philippines by

non-residents - 12%
THE
END
 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 +0% +5% +10% +15% +20% +25% +30% +32%
(`000P)   over over over over over over over over
A. Table for employees without qualified dependent
1. Z 0.0 1 0 192 577 1,346 2,692 4,808 9,615
2. S/ME 50.0 1 962 1,154 1,538 2,308 3,654 5,769 10,577
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 2 3 4 5 6 7 8
10,416.6
  0.00 0.00 41.67 208.33 708.33 1,875.00 4,166.67
Exemption 7

Status +0% +5% +10% +15% +20% +25% +32%

  over over over over over over
+30% over
over
(`000P)

A. Table for employees without qualified dependent

1. Z 0.0 1 0 833 2,500 5,833 11,667 20,833 41,667

2. S/ME 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 non-taxable income are those which are
specifically exempted from income tax under the
Tax Code or by other special laws as listed in
Section 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 P8,300.00

Less: compensation level
(Table B, Line 2, Column 5) 7,083.00
Excess P1,217.00
Tax on P7,083.00 P 354.17
Tax on excess (P1,217.00 x 20%) 243.40
Withholding tax for January, 2009 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 P10,000.00

Less: Compensation Level
(Table B, Line 4, Column 5) 9,167.00
Excess P 833.00
Tax on P9,167.00 P 354.17
Tax on excess (P833.00 x 20%) 166.60
W/Tax for October 16-30, 2009 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 P15,000.00*
Productivity IB 10,000.00*
Loyalty pay 3,000.00*
Total Gross Benefits P 28,000.00*

*NOTE: Non-taxable because the 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
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
not exceed the amount of his personal
during the taxable year does
exemptions (basic and additional), he shall be exempt from
income tax and shall not be required to file an income tax
return.
Hence, he can still be liable for other taxes such as:

1. The 20% final withholding tax on interest income

from any currency bank deposit

2. The 7.5% final withholding tax on interest income from a

depository bank under the expanded foreign currency deposit system (Sec.
24(B)(1), Tax Code

3. If the Senior Citizen will pre-terminate his 5-year long-term deposit or

investment
 Four years to less than five years — 5%
 Three years to less than four years — 12%; and
 Less than three years — 20%
Hence, he can still be liable for other taxes such as

4 . The 10% final withholding tax –  

 On cash and/or property dividends actually or constructively received from a domestic corporation
or from a joint stock company, insurance or mutual fund company and a regional operating
headquarters of a multinational company; or
 On the share of an individual in the distributable net income after tax of a partnership (except a
general professional partnership) of which he is a partner; or
 On the share of an individual in the net income after tax of an association, a joint account, or a joint
venture or consortium taxable as a corporation of which he is a member or a co-venturer (Sec. 24(B)
(2), Tax Code).

5 . Capital gains tax from sales of shares of stock not traded in the stock
exchange (Sec. 24(C), Tax Code); and
 

6. The 6% final withholding tax on presumed capital gains from sale of

real property, classified as capital asset, except capital gains presumed to have been realized from
the sale or disposition of principal residence (Sec. 24(D), Tax Code).
 SEC. 4. Grant of Discounts to Senior Citizens-
20%.
1.Medicines, including influenza and pneumococcal vaccines,
and such other essential medical supplies, accessories and
equipment to be determined by the DOH. 
On all drug stores, hospital pharmacies, medical and optical clinics and similar establishments dispensing medicines, the
discount for sales of drugs/medicines shall be subject to the Guidelines to be issued by the BFAD-DOH, in coordination
with the PHILHEALTH.

both prescription and non­

For this purpose, the term "medicines" shall refer to

prescription medicines, and articles approved

by the BFAD-DOH, which are intended for use in the diagnosis, cure, mitigation, treatment or prevention of disease in
man; but do not include food and devices or their components, parts, or accessories.

 
2. On the professional fees of attending physician/s in all
private hospitals, medical facilities, outpatient clinics and home health care
services, where the discount shall be based on the compensation for services
charged from the Senior Citizen.
1.On professional fees of licensed professional
health workers providing home healthC.care services as endorsed by private hospitals or
employed through home health care employment agencies, where the discount shall be based on the fees charged from
the Senior Citizen.

D. On medical and dental services, diagnostic and laboratory

fees in all private hospitals, medical facilities, outpatient clinics, and home health care services, in accordance with
the rules and regulations to be issued by the DOH, in coordination with the PhilHealth.
 
 “Medical services” refers to hospital services, professional services of physicians and other health care
professionals and diagnostic and laboratory tests that are necessary for the diagnosis or treatment of an illness or injury.
 
 “Dental services” refers to oral examination, cleaning, permanent and temporary filling extractions and gum
treatments, restoration, replacement or repositioning of teeth, or alteration of the alveolar or periodontium process of the
maxilla and the mandible that are necessary for the diagnosis or treatment of an illness or injury.
 
 “Home health care service” refers to health or supportive care provided to the Senior Citizen patient at
home by licensed health care professionals to include but not limited to, physicians, nurses, midwives, physical
therapists and caregivers
e. In actual fare for land transportation travel in
 public utility buses (PUBs),
 public utility jeepneys (PUJs),
 taxis,
 Asian utility vehicles (AUVs),
 shuttle services and
 public railways, including
 Light Rail Transit (LRT),
 Mass Rail Transit (MRT), and
 Philippine National Railways (PNR).

f. On actual transportation fare for domestic air transport services

and sea shipping vessels and the like, based on the actual fare and
advanced booking.
G. On the utilization of services in hotels and similar lodging establishments,
restaurants and recreation centers.
 
g.1 For hotels and similar lodging establishments, the discount shall be for
room accommodation and other amenities offered by the establishment,
such as, but not limited to, massage parlor, sauna bath, food, drinks and
other services offered.

 For this purpose, the term "hotel/hostel" shall refer to the building, edifice
or premises or a completely independent part thereof, which is used for the
regular reception, accommodation or lodging of travelers and tourists, and
the provision of services incidental thereto, for a fee.
"Lodging establishment" shall refer to a building, edifice,
structure, apartment or house including tourist inn, apartelle,
motorist hotel and pension house engaged in catering, leasing or
providing facilities to transients, tourists or travelers.

The following are considered as lodging establishments :

 
 Tourist Inn — a lodging establishment catering to transients, which does not meet the minimum requirement of an
economy hotel.
 
 Apartelle — a building or edifice containing several independent and furnished or semi-furnished apartments,
regularly leased to tourists and travelers for dwelling on a more or less long-term basis and offering basic services to its
tenants, similar to hotels.
 
 Motorist Hotel — any structure with several separate units, primarily located along the highway, with individual
or common parking space, at which motorists may obtain lodging and in some instance, meals.
 
 Pension House — a private, or family-operated tourist boarding house, tourist guest house or tourist lodging
house, regularly catering to tourist, and/or traveler, containing several independent table rooms, providing common
facilities, such as toilets, bathrooms/showers, living and dining rooms and/or kitchen and where a combination of board
and lodging may be provided.
G4. The term lodging establishment shall also include lodging houses, which
shall mean such establishments are regularly engaged in the hotel business,
but which, nevertheless, are not registered, classified and licensed as hotels
by reason of inadequate essential facilities and services. Long term
arrangement for residential purposes is not covered.

 
  G.5. For restaurants, the discount shall be for the sale of food, drinks, dessert
and other consumable items served by the establishments, including value
meals and promotional meals offered for the consumption of the general
public.
 

G.6. For this purpose, the term "restaurant" shall refer to any
establishment offering to the public, regular and special meals or menu,
fast food, cooked food and short orders. Such eating places may also serve
Food and goods sold by
coffee, beverages and drinks.
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
SEC. 5.

Citizens and Senior Citizens Centers.


5% discount upon concurrence of the following:
1. the individual meters in the name of the Senior Citizen residing therein;
2. the monthly consumption does not exceed

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.
SEC. 5.Special Discount granted to
Senior Citizens and Senior Citizens
Centers.
For water, electricity and telephone, there shall be


granted by public utilities a discount of at least 50% on the consumption

by a Senior
Citizens Center and residential
care/group homes that are run by the Government or by a
non-stock, non-profit domestic corporation organized and
operated primarily for the purpose of promoting the well-being
of abandoned, neglected, unattached, or homeless Senior
Citizens, subject to the guidelines formulated by the DSWD.
 The discount that shall be granted to the Senior Citizen shall be the
promotional discount or the minimum
discount prescribed in this Regulation.
 This means that, in no case shall the discount granted to Senior Citizens be less than
20%, or in the case of water and electricity supplied by public utility companies, be
less than 5%.

 The minimum discount shall not be treated as an addition to the

promotional discount, provided that, if the promotional discount is less
than the minimum discount prescribed in the Act for Senior Citizens, the
seller shall increase the discount to meet the said minimum discount
prescribed for Senior Citizens.
SEC. 6. Determination of the Amount of Discount

 . – The grant of the discount is only for the purchase of

goods and services enumerated in the Act for THE
EXCLUSIVE USE AND
ENJOYMENT OR AVAILMENT
OF THE SENIOR CITIZEN.
The following rules shall be observed in granting the discount: Medical-Related Privileges:

 (a)MEDICINE AND DRUG

PURCHASES –
The 20% discount and VAT exemption shall apply to the purchase of
generic or branded medicines and drugs by or for senior citizens, including
the purchase of influenza and pneumococcal vaccines.

The 20% discount and VAT exemption shall also be granted to the purchase
of vitamins and mineral supplements which are medically prescribed by an
attending physician for prevention and treatment of diseases, illness, or
injury whose prescription is in the name of the Senior Citizen.
Medical-Related Privileges:

 (b)
ESSENTIAL MEDICAL SUPPLIES,
ACCESSORIES AND EQUIPMENT – The 20%
discount and VAT exemption privilege shall also apply to the purchase of
 eyeglasses, hearing aids,
 dentures, prosthetics,
 artificial bone replacements like
 steel, walkers, crutches, wheelchairs whether manual or electric-powered,
 canes/quad canes,
 geriatric diapers, and
 other essential medical supplies, accessories and equipment by or for senior citizens.
 Medical-Related Privileges:
(c) MEDICAL AND DENTAL SERVICES IN PRIVATE FACILITIES –
Medical and dental services, diagnostic and laboratory tests such as but not
limited to X-Rays, computerized tomography scans, and blood tests, that are
requested by a physician as necessary for the diagnosis and/or treatment of an illness
or injury are subject to the 20% discount and VAT exemption.
 
(d) PROFESSIONAL FEES OF ATTENDING PHYSICIAN/S in all private
hospitals, medical facilities, outpatient clinics and home health care facilities
shall be subject to the 20% discount and VAT exemption.
 
(e) PROFESSIONAL FEES OF LICENSED HEALTH WORKERS
PROVIDING HOME HEALTH CARE SERVICES as endorsed by private
hospitals or employed through home health care employment agencies are entitled to
the 20% discount and VAT exemption. agency given the health worker’s very minimal
share compared to the agency fee.
The burden of the discount shall be borne solely by the employment
Domestic Transportation Privileges:
The DOTC, in coordination with the MARINA, PPA, CAB, LRTA, PNR,
MRTA and LTFRB, shall within thirty (30) days from effectivity of these
Rules issue the necessary circulars or directives on the following
transportation privileges of senior citizens:
 

(a) AIR AND SEA TRANSPORTATION

PRIVILEGES – Fare for domestic air, and sea travel, including
advanced booking, shall be subject to the 20% discount and VAT exemption, if
applicable.
 

(b) PUBLIC LAND TRANSPORTATION

PRIVILEGES – Fare in public railways, including LRT, MRT, and
PNR, fares in buses (PUB), jeepneys (PUJ), taxi and shuttle services (AUV), are
likewise subject to the 20% discount and VAT exemption, if applicable.
 Hotels, Restaurants, Recreational Centers and Places of
Leisure, and Funeral Services
(a) HOTELS AND SIMILAR LODGING ESTABLISHMENTS – The discount
shall be for room accommodation and other amenities offered by the establishment
such as but not limited to hotel-based parlors and barbershops, restaurants, massage
parlor, spa, sauna bath, aromatherapy rooms, workout gyms, swimming pools,
jacuzzis, ktv bars, internet facilities, food, drinks and other services offered.
`The term “hotel” shall include beach and mountain resorts.
 

(b) RESTAURANTS – The discount shall be for the purchase of food, drinks, dessert, and other
consumable items served by the establishments offered for the consumption of the general public.

 (c) For Dine-in services under paragraphs (a) and (b) of Section 3, and Section 4, paragraph 2
of Article 7, the privilege must
be personally availed of by the senior
citizen as defined under these Rules, and no proxies or authorization in favor
of another person who is not a senior citizen will be honored.
 Hotels, Restaurants, Recreational Centers and Places of
Leisure, and Funeral Services
(d) The phrase “exclusive use and enjoyment” of the senior
for the senior citizen’s personal
citizen shall mean “

consumption” only.
Shall not apply to “children’s meals” which are primarily prepared and
intentionally marketed for children.

Similarly, shall not apply to “pre-contracted” party packages or bulk orders.

 
 Hotels, Restaurants, Recreational Centers and Places of
Leisure, and Funeral Services
(e) Food, drinks and other consumable items provided in Section 3 (a) and
(b), and Section 4, paragraph 2 of Article 7 purchased by the senior citizen
shall be processed separately as an
independent transaction from his/her non-
eligible companions to ensure that it is for his/her exclusive
consumption and to enable computation of the 20% discount and the
exemption from the VAT, which only the senior citizen is entitled to.
 
However, if the group of diners is composed entirely of senior citizens, all of
whom present valid senior citizens IDs, each shall be entitled to a 20%
discount and exemption from Value Added Tax
 Hotels, Restaurants, Recreational Centers and Places of Leisure,
and Funeral Services
(f) Apply to Take-Out/Take-Home/Drive-Thru orders (excluding bulk
orders) as long as it is the senior citizen himself/herself who is present and
personally ordering, and he/she can show a valid senior citizen ID card.
 
(g) For Delivery Orders (excluding bulk orders), the 20% discount shall likewise apply
subject to certain conditions; i.e.
 senior citizen ID card number must be given while making the order over the telephone;
 the senior citizen ID card must also be presented upon delivery to verify the identity of
the senior citizen

 Delivery fee charged separately are not entitled to the discount and is
subject to tax.
 
 Hotels, Restaurants, Recreational Centers and Places of Leisure,
and Funeral Services
(h) For the above-mentioned transactions under paragraphs (f) and (g) of Section 3 of
Article 7, the Most Expensive Meal Combination (MEMC) shall
apply to food purchases by senior citizens.

The MEMC is an amount corresponding to the combination of the most expensive

and biggest single-serving meal with beverage served in a quick service restaurant,
is deemed flexible and is adjusted accordingly by food establishments to estimate a
single food purchase for an individual senior citizen.
Recreation Centers
 The discount shall be for the utilization of services in the form of fees,
charges and rental for sports facilities or equipment, including golfcart
rentals and green fees, or venues for ballroom dancing, yoga, badminton
courts, bowling lanes, table or lawn tennis, workout gyms, martial arts
facilities.
 
 Non-profit, stock golf and country clubs which are not open to the general
public, and are private and for exclusive membership only as duly proven
by their official SEC registration papers, are not mandated to give the
20% senior citizens discount.

 However, should restaurants and food establishments inside these country clubs be
independent concessionaires and food sold are not consumable items under club
membership dues, they must grant the 20% senior citizen discount.
Admission fees Privilege

 The discount shall be applied to admission fees charged by

theatres, cinema houses and concert halls, circuses,
carnivals, and other similar places of culture, leisure and
amusement such as museums and parks.
 Funeral and Burial Expenses
 The beneficiary or any person who shall shoulder the funeral and burial expenses of the
deceased senior citizen, shall claim the discount under this Rule for the deceased senior
citizen upon presentation of the death certificate.
 Such expenses shall cover the:
 purchase of casket or urn,
 embalming,
 cremation cost, and
 other related services such as
 viewing or wake cost,
 pick-up from the hospital morgue,
 transport of the body to intended burial site in the place of origin,

but shall exclude :

1. obituary publication and

2. the cost of the memorial lot
 SEC. 7. Tax Treatment of the
Discount Granted to Senior Citizens
May claim the discounts granted as a tax
deduction based on the
cost of the goods sold or services
By way of example, if a VAT-registered drug store sells 10 pieces of Allopurinol
at an undiscounted selling price of P5.00 per piece, the cost of the discount is
computed as follows:
 

Selling Price (VAT-exempt) of 10 pcs. at P5.00/pc. P50.00

Less: 20% Discount 10.00
Amount Payable by the Senior Citizen P40.00
 SEC. 7. Tax Treatment of the Discount
The selling price to be charged by the seller must
be net of VAT because the sale to Senior Citizens
is exempt from VAT.
 The cost of the discount in the above illustration is P10.00 and shall be allowed as a deduction from gross
income for the same taxable year that the discount is granted, provided that, the total amount of the claimed tax
deduction net of VAT, if applicable, shall be included in their gross sales receipts for tax purposes and shall be
subject to proper documentation in accordance with the provisions of the Tax Code. This means that for the
establishment to be allowed to claim the discount as a deduction, the amount of sales that must be reported for
tax purposes is the undiscounted selling price and not the amount of sales net of the discount.

 The income statement of the seller must reflect the discount,

not as a reduction of sales to arrive at net sales, but as a
deduction from its gross income
(sales less cost of sales).
Entry to record the transaction in the books of
the seller
Debit – 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 of sales, which
shall include the
 name of the Senior Citizen,
 OSCA ID,
 gross sales/receipts,
 sales discount granted,
 dates of transactions and
Deduction from the gross income of the seller is
subject
 to the following
Only business conditions:
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

submitting a certified
jurisdiction over the place where the Senior Citizen resides), by

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. 16-
2005. 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


gross income equivalent to 15% of

deduction from their

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. FOOD – marami nang bawal.
      

2. TRANSPORTATION – nahirapan nang sumakay.

      

3. GROCERIES – ‘di na kayang buhatin.

      

4. CINEMA – malabo na ang mata.

    

5. CONCERTS – mahina na ang pandinig.

      

6. GAMOT – hindi malunok.

      

7. HOTELS – anong gagawin naman duon?

      

 
Enjoy life while you’re still young, don’t wait for
discounts. 
 
 
                  
 
 
 
 UPDATES

1. Revenue Regulations (RR) No. 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 non- taxable contributions to these government offices
cover only the mandatory contributions and all other voluntary contributions
in excess of what the law allows are subject to income tax and withholding
tax.
 
9. RMC 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%.