WITHHOLDING TAX

ON COMPENSATION

Computation of Wages
Computation of wages is governed by the following rules:

Computing Overtime:
On Ordinary Days
Plus 25% of the hourly rate multiplied by the number of hours.

On a rest day, special day or regular holiday

Plus 30% of the hourly rate on said days multiplied by the number of
hours.

Computing pay for work done on:

A special day (a total of 130% x basic pay)
A special day, which is also a scheduled rest day (a total
of 150% x basic pay)
A regular holiday (a total of 200% x basic pay)
A regular holiday, which is also a scheduled rest day (a
total of 260% x basic pay)

 Computing Night Shift Premium Where Night Shift is a Regular Work:

On Ordinary day (110% x basic hourly rate)
On a rest day, special day, regular holiday (110% of regular hourly
rate for a rest day, special day, regular holiday)
Computing Overtime on Night Shift:
On ordinary day (110% x overtime hourly rate)
On rest day, special day or regular holiday (110% x overtime hourly
rate for rest days, special days, regular holidays)

Computing 13th Month Pay:

Total basic salary earned for the year exclusive of

allowances, overtime, holiday, premium and night shift
differential pay divided by 12 months = 13th month pay.

 Special Days
During special days, the principle of "no work, no pay" applies and on
such other special days as may be proclaimed by the President or by the
Congress.
Workers who were not required or permitted to work on those days
are not by law entitled to any compensation. This, however, is without
prejudice to any voluntary practice or provision in the Collective
Bargaining Agreement (CBA) providing for payment of wages and other
benefits for days declared as special days even if unworked.
Holiday Pay refers to the payment of the regular daily wage for any
unworked regular holiday.
`

 Regular Holidays
Every employee covered by the holiday pay rule is entitled to his
daily wage for any unworked regular holiday. This means that the
employee is entitled to at least 100% of his wage even if he did not
report for work, provided he is present or is on leave of absence with
pay on the work day immediately preceding the holiday.
`

1. The first step is to answer the following

questions below:
What is TAXPAYERS (TP) Status? (Single or Married?)
Does he/she has any Qualified Dependent? How Many?
How much is the Monthly Basic Pay(salary)?(This does not include
overtime pay/monetary value of your late/tardiness, holiday pay, but
includes the monthly allowance received.)

2. How much is the monthly contributions for

SSS,Philhealth,and HDMF (Pag-Ibig)?
Suppose that the monthly basic pay(salary) is P11,000.00 then by
looking at the table above(under the column of Range of
Compensation) just find the range of compensation that includes
P11,000.00 and simply move horizontally and look for your
corresponding SSS Contribution(under the main column Social
Security and sub-column EE or Employee Contribution).So what did
you see? P399.70?.
Now just try it on your own,suppose your monthly basic pay(salary)is
P14,000.00 what is your SSS Contribution?

 After looking for employees (EE) SSS Contribution it is time now to

know how much is the employer's contribution counterpart.Again,
find the Range of Compensation where the employee belong, move
horizontally, and just look under the main column Social Security
and sub-column ER or Employer Contribution.
Suppose an employee has an P11,000 monthly basic pay (salary)
then the ER or Employer Contribution would be P810.30 and the
total monthly contribution that debit in the SSS is P1,210 (P810.30
+P399.70).
If your monthly basic pay (salary) is P14,000, what is your employer
contribution?your total contribution? Answer: ER= ______; TC=
______

For Philhealth:
Illustration:
For instance the employee has a monthly basic pay (salary) of P11,000, then
the Philhealth Monthly Contribution would be P137.50. Look for the column
under Monthly Salary Range and find for the interval where your salary belongs.
After that, move horizontally(to the right) and find for the corresponding
Philhealth Monthly Contribution under theEmployee's Share Column.
Example my gross basic pay (salary) is P14,000.00,how much is my Philhealth
Monthly Contribution? Answer:P175.00
It is also better and wise to know your employer's contribution counterpart
.Again, going back to the Philhealth Table above just look for the column
under Employer's Share that corresponds to your monthly gross income.If your
monthly gross income is P11,000.00 then your Employer's Share is P137.50 and
the total amount that debit in your Philhealth Contribution is P275.00
(Employee's Share + Employer's Share).

For HDMF/Pag-Ibig Contribution:

For HDMF/Pag-Ibig Contribution:

Illustration:
If your Monthly Basic Pay (Salary) is P11,000 then your HDMF
Contribution is P11,000.00 X .02 = P220 and your Employer's
Counterpart is P11,000.00 X .02 = P220 . This computation is so
easy. After you know where your Gross Monthly Salary
Range belong just multiply it by the MULTIPLIER that
corresponds to your monthly basic pay (salary) .The total
monthly contribution that debit in your HDMF Contribution
is P440.00 monthly.

3. Does the taxpayer receives other

allowances like laundry
allowance,transportation allowances, rice
allowances,etc.? If yes how much?

4.What is TAXABLE INCOME?

Taxable income is the portion of income that is the subject of
taxation.

In the Philippines our taxable income is determined by this

formula:
Taxable Income = [Gross (Basic)Monthly Income+ Overtime
Pay+Holiday Pay+Night Differential] - (minus) [Tardiness
Deduction+Allowances+SSS Contribution+Philhealth
Contribution,HDMF Contribution]

5. Factors you need to consider when solving

your withholding tax.
Factors that increases your tax:
Overtime Pay
Holiday Pay
Night Differential

Factors that decreases your tax:

Late/Tardiness
Allowances
SSS Contribution
Philhealth Contribution
HDMF Contribution
Personal Exemptions (ex. single, head of the family, head of the
family with qualified dependents,etc)

6. BIR Tax Table

7. Knowing the General Formula of Withholding Tax, Knowing
the Parts and to Use the Tax Table, and Computing Your
Withholding Tax
General Formula:
Withholding Tax = ( ([Taxable Income] - [Bracket or
Exemption] ) x [%over] ) + [Bracket Tax or Base Tax]

 Where as Taxable Income=[Gross (Basic)Monthly Income+ Overtime

Pay+Holiday Pay+Night Differential] - (minus) [Tardiness
Deduction+Allowances+SSS Contribution+Philhealth
Contribution,HDMF Contribution]

Parts of Tax Table

Bracket or Exemption
%over
Bracket Tax or Base Tax

SAMPLE
Assuming your tax is computed in a monthly basis and you already
computed your TAXABLE INCOME (not your gross income) totaling
to P8,558 and you are Single then:

Corresponding Bracket or Exemption:P6,667.00

Corresponding %over: 15% or.15
Corresponding Bracket Tax or Base Tax: P208.33

 Assuming Withholding Tax Computed Monthly

Taxable Income: P8558.00
Status: Single(S)

Computing Your Withholding Tax:

Withholding Tax = ( ([Taxable Income] - [Bracket or Exemption] ) x
[%over] ) + [Bracket Tax or Base Tax]

 Example 2:
Given:
Assuming Withholding Tax Computed Monthly
Taxable Income: P12,540.00
Status: Single or Married with 1 Qualified Dependent (S1 or M1)
Computing Your Withholding Tax:
Withholding Tax = ( ([Taxable Income] - [Bracket or Exemption] ) x
[%over] ) + [Bracket Tax or Base Tax]

 Assuming Withholding Tax Computed Monthly

Gross or Basic Income: P11,000.00
Monthly Transportation Allowance:P500.00
Monthly Rice allowance:P500.00
Late/Tardiness:2hrs
Overtime: 4 hrs (regular day)
HDMF /Pag-Ibig Contribution: P300.00
Status: Married with 2 Qualified Dependents (M2)
Days of Duty:22 days (8hrs per day)
Problem: How much is your monthly withholding tax given the
information above?