WHAT IS BARANGAY MICRO BUSINESS ENTERPRISE/ BMBE?

QUESTION: CAN WE RUN A BUSINESS WITHOUT PAYING INCOME TAX, LEGALLY?

ANSWER: YES

QUESTION: HOW?

ANSWER: REGISTER AS A BARANGAY MICRO BUSINESS ENTERPRISE (BMBE)

REPUBLIC ACT 9178, BARANGAY MICRO BUSINESS ENTERPRISES ( BMBE’S) ACT OF 2002

WHAT IS THIS LAW ABOUT?

The BMBE’s Act of 2002 encourages the formation and growth of Barangay Micro Business Enterprises by granting them incentives and benefits.

WHAT ARE THE BENEFITS AND INCENTIVES OF REGISTERED BMBE’S?   

1.      Income tax exemption from income arising from the operations of the enterprise.

2.       Exemption from coverage of the Minimum Wage Law BUT BMBE employees will still receive the same social security and health care benefits like other employees.

3.       Priority to a special credit window set up specifically for financing requirements of BMBE’s

4.       Technological transfer, production and management training, and marketing assistance programs for BMBE’s beneficiaries.

WHAT IS BARANGAY MICRO BUSINESS ENTERPRISE (BMBE)?

Under Republic Act No. 9178 or the BMBE’s Act of 2002, a BMBE is referred to as any business entity or enterprises engaged in the production, processing or manufacturing of products or commodities, including agro-processing , trading and services whose total assets excluding land, shall not be more than P 3 million. Such assets shall include those arising from loans but not the land on which the plant and equipment are located.

SO, what exactly is a MICRO BUSINESS?

A micro business or enterprise is defined as any business activity or enterprise engaged in industry, agribusiness and or services, whether single proprietorship, cooperative, partnership or corporation whose total assets, inclusive of those arising from loans but exclusive of land on which the particular business entity’s office, plant and equipment are situated, must have value not more than three (3) million pesos. ( Sec. 3 of R.A. 9501 otherwise known as the Magna Carta for Micro, Small, Medium Enterprises. (MSMEs)

Total Asset  (exclusive of land) = 2.5 M

Land(where office, plant & equipment are situated ) = 4M

_______________________________

MICRO BUSINESS

Total Asset (exclusive of land)  = 4M

Land (where office, plant & equipment are situated ) = 1M

_______________________________

NOT MICRO BUSINESS

If your business or enterprise falls under micro business category, you MAY  BE eligible to be registered as a Barangay Micro Business Enterprise (BMBE) and enjoy the benefit and incentives of the “ Barangay Micro Business Enterprise Act of 2002 also known as R.A. 9178.

WHERE TO REGISTER AS A BMBE?

BARANGAY MICRO BUSINESS ENTERPRISE  (BMBE’S) CAN NOW REGISTER THEIR BUSINESSES, FREE OF CHARGE , AT THE DEPARTMENT OF TRADE AND INDUSTRY (DTI) THROUGH THE AGENCY’S NEGOSYO CENTERS.

GREAT!!! NEXT QUESTION!!

HOW DOES ONE REGISTER AS A BMBE?

Based on the revised guidelines issued by DTI, any person, natural or juridical, such as partnership, corporation, association and cooperation, having the qualification and none of the disqualifications shall be eligible to register as BMBEs.

A person applying  to be registered as a BMBE shall meet the following qualifications:                   

1.       With an asset f not more than three million pesos ( P 3,000,000.00) excluding land

2.       Engaged in the production , processing or manufacturing of products or commodities, including agro – processing , trading and services.

3.       Registered with the Department of Trade and Industry for Sole proprietorships, for juridical persons: with the Securities and Exchange Commission (SEC)  for corporation, partnerships and associations; and with the Cooperative Development Authority for cooperatives.

Applications for BMBE Certificate of Authority shall be filed with the Negosyo Centers established in each province, city or municipality, or in the DTI offices where Negosyo Centers have not been set up.

The following shall be submitted in support of the duly filled up BMBE application form:

A.      Certificate of Business Name Registration from the Department of Trade and Industry (DTI) or

B.      Certificate of Registration from the Securities and Exchange Commission (SEC) or

C.      Certificate of Registration from the Cooperative Development Authority (CDA).

WHAT IS THE PROCEDURE FOR REGISTRATION?

The applicant shall follow the steps herein enumerated in applying for BMBE Certificate of Authority (CA):

1.       Accomplish and file the application form for BMBE Certificate of Authority;

2.       The DTI , through the Negosyo Center, evaluates the application for purposes of determining the eligibility and qualification as a BMBE;

3.       The DTI after finding the applicant to be eligible and qualified, issues the BMBE Certificate of Authority within fifteen  (15) working days from receipt  of application with complete requirements;  otherwise, the BMBE CERTIFICATE OF AUTHORITY shall be deemed approved ( where in such a cases it becomes ministerial on the part of DTI to issue the BMBE Certificate of Authority).

WHAT IS THE VALIDITY PERIOD OF THE BMBE CERTIFICATE OF AUTHORITY REGISTRATION?

The BMBE Certificate  Authority shall be effective for a period of two (2) years commencing from the date of issuance. The CA may be renewed for the same period of two years (2) and every two years  thereafter subject to the applicant’s continued compliance with the eligibility requirements prescribed by law and DTI DAO No. 16-01 Series of 2016.

HOW MUCH WILL IT COST TO REGISTER?

The registration and issuance of the CA shall be FREE OF CHARGE

HOW CAN A BMBE AVAIL OF THE EXEMPTION FROM COVERAGE OF THE  MINIMUM WAGE LAW?

Once a BMBE is registered and issued with a Certificate of Authority, it is automatically EXEMPTED from the minimum wage law.

FINALLY!!

WHAT ARE THE STEPS IN AVAILING OF THE INCOME TAX EXEMPTION?

The  BMBE registers with the BIR Revenue District Office ( RDO) where the principal office or place of business is located and it’s submission of the necessary documents.

The ff are the documents to be submitted to BIR to avail of Income Tax Exemption:

1.       Copy of the BMBE’s Certificate of Authority

2.       Sworn Statement of Assets of the BMBE and/or its affiliates, supported by pertinent documents

3.       Certified list of branches, sales outlets, places of production, warehouses and storage facilities

4.       Certified list of affiliates

5.       Latest audited Financial Statement or Account Information Form .

WHAT DOCUMENT SHOULD BE FILED WITH BIR BY AN INCOME TAX EXEMPT BMBE?

Instead of an income tax return, an income tax exempt BMBE is required to submit an Annual Information Return. This is filed on or before the 15th day of the 4th month after the close of the

taxable year with an Account Information Form, which contains data from its financial statement and Sworn Statement of Assets Owned and/or Used.

CAN MY INCOME TAX EXEMPTION BE REVOKED?

YES!

YOUR INCOME TAX EXEMPTION CAN BE REVOKED FOR ANY OF THE FF REASONS:

1.       Transfer of place of business

2.       Value of its total assets exceeds P3M

3.       Voluntary surrender of the Certificate of Authority

4.       Death of the registered individual owner of the BMBE; violation or noncompliance with the provisions of R.A. 9178

5.       Merger or consolidation with an entity which is not eligible to be a BMBE

6.       Sale or transfer of the BMBE, if it is a sole proprietorship without prejudice to the transferee applying for registration

7.       Submission of fake or falsified documents;

8.       Retirement from business, or cessation/suspension of operations for one year; and

9.       Making false or omitting required declarations or statements

There you go, STEPS ON HOW TO REGISTER AS A BMBE for you to be exempted from income tax.  Good luck in your business.  We would like to hear from you. Please email us your experience in applying for your Certificate of Authority. Send it to  ione.mejia@gmail.com. Thank you.

  

Do you have to register your manual books of account every year?

Do you have to register your Manual Books of Account every year?

by: Ione Baron-Mejia

A question as old as time! The perennial question every year! 

Kailangan bang tatakan ng BIR ang "libro" ( manual books of account for small business owners) every end of the year?

Ladies and gentlemen! Presenting, the answer to your perpetual question, RMC 82-2008,  BIR Revenue Memorandum Circular 82-2008. 

RMC 82-2008 states:

1.) Taxpayers are not required to register a new set of books every year unless all pages were fully utilized.

2.The Tax Service Section (TSS) of the RDO's or concerned office under Large Taxpayer Service ( the revenue officer) has no authority to examine whether the previously registered books are complete or updated.

3.) There are no deadlines of registering the manual books of accounts, but the manual books of accounts should be registered before its use.

So, there you go!

Malinaw na! Punuin nyo muna ang libro bago patatakan. 

Click link to check the RMC!

BIR RMC 82-2008

Got question or suggestion? Tax help? Email us: ione.mejia@gmail.com

HOW TO BE A BIR TAX AGENT?

HOW TO BE A BIR TAX AGENT?

By: Ione Mejia

IS THE ONE DOING YOUR TAXES AN ACCREDITED BIR TAX AGENT?

DO YOU WANT TO BE AN ACCREDITED BIR TAX AGENT?

Read on, this is for you.

So, what exactly is  a tax agent?

Tax agents/practitioners as per BIR Revenue Regulation 11-2006 are the ff:

     1. those engaged in the regular preparation, certification, audit, and filing of tax returns, information returns or other statement or reports required by the Code or regulations

     2. those who are engaged in the regular preparation of request for ruling, petitions for re investigation, protests, requests for refund or tax credits certificates compromise settlement and/or abatement of tax liabilities and other official papers and correspondence with the Bureau of International Revenue and other similar or related activities

         3. those who regularly appears on meetings, conferences, and hearing before any office of the Bureau of Internal Revenue officially on behalf of the taxpayer or client in all matters relating to a client's right and privileges, or liabilities under laws or regulations administered by the BIR

Those engage in the tax practice above are required to apply for accreditation.
(Section 2(e) RR 11-2006)

WHO ARE REQUIRED TO REGISTER?

1. Individual tax practitioner engaged in private practice who are Certified Public Accountant (CPA's); CPA-Lawyers who issue/sign auditors certificate or otherwise perform functions exclusively pertaining to a CPA; and individual other than CPA's who meet the qualifications prescribed in these Regulations;

2. Partners of a General Professional Partnership (GPP) engaged in the practice of taxation, accountancy, and/or auditing; their duly authorized officers or representative who regularly appear or otherwise engage in tax practice before the BIR.

3. General Professional Partnership engaged in the practice of taxation, accountancy and auditing who regularly appears or otherwise engaged in tax practice before the BIR.

4. Officers or duly authorized representatives of incorporated business entities engaged in accounting, auditing or tax consultancy services.

WHAT ARE THE QUALIFICATION OF APPLICANTS?

SECTION 4 ( RR 11-2006)  - Minimum qualification of Applicants - In general, the grant of accreditation shall be based on the applicant's professional competence, integrity and moral fitness. Along these lines, the following are hereby prescribed:

A. FOR THE INDIVIDUAL TAX AGENTS  ( other than member of the Philippine bar)
 
       1. He must be  Certified Public Accountant ( CPA) with current professional license from the Professional Regulations Commission (PRC).

       2. If he is not a CPA, he must have obtained at least a degree in law, Juris Doctor (JD) or it's equivalent, or a Bachelor's degree in Arts, Commerce or Business Administration with at least (18) units in accounting and/or taxation in a college or university recognized by the Department of Education, Culture and Sports (DECS)/ Department of Education (DepEd), Commission on Higher Education (CHED) or in a foreign school of known repute or one duly recognized by it's government. In addition , he must be able to demonstrate or present convincing proof of special competence in tax matter or tax practice, ex. previously acquired experience; at least (18) credit hours of special training, seminars, short ern course, etc. in taxation obtained not more than one (1) year prior to the application of the accreditation , subject to evaluation and approval of the Board;

     3. He must be of good moral character as certified under oath by at least two (2) disinterested persons who are either members of the Philippine Bar or A Certified Public Accountants in good standing.

     4. He must not have been charged with and convicted with final judgement of a crime involving moral turpitude, or found guilty of any act or omission penalized under the Tax Code, or found guilty of aiding or abetting or causing the commission of any such offense by another, and.

      5. He must be a citizen of the Philippines.

    6.  He must have completed at least six (6) hours per year or total of eighteen (18) hours for the three years of continuing professional education (CPE) in taxation from training/seminars conducted by the BIR ( Ex. Revenue Regions, Revenue District Offices, etc.) or from private institutions ( ex. tax/auditing firms, educational or training institutions, professional organization, etc. ) where the number of training hours earned are printed on the certificates and obtained not more than a year prior to the application/renewal for accreditation.


B. FOR GENERAL PROFESSIONAL PARTNERSHIP - In case of GPP's engaged in the exercise of professional accountancy, auditing or tax consultancy services (other than general professional partnerships engaged in the practice of law), the application for accreditation files by the partners and/or the duly authorized officers and representatives therefore shall conform with the ff:

   1. The partners and duly authorized officers or representatives thereof must meet all the qualifications of an individual tax agent as prescribed in the Section 4(A) hereof. In lieu of the submission of documents or proof thereof, said qualifications may be certified to under oath by managing partner of the firm; and

      2. The partnership is one registered with Securities and Exchange Commission.

C. IN THE CASE OF INCORPORATED ENTITIES engaged in accounting and tax consultancy other than general professional partnerships:

     1. the firm must be registered with the Securities and Exchange Commission (SEC);and

    2. The applicant-officers or duly authorized representatives thereof must meet all the qualfications of an individual as prescribed under Section 4(a) hereof.

WHAT ARE THE ACCREDITATION PROCEDURES?

SECTION-5  (RR 11-2006)
I-  WHERE TO FILE?

All applicant shall accomplished their application for accreditation in the form to be prescribed by the Commissioner of Internal Revenue. The duly-accomplished application form shall be submitted together with all documentary requirements prescribed in the (B) (1) or (2) of this Section, whichever is applicable with the Regional Revenue Accreditation Board (RRAB) of the place where the individual applicant or general professional partnership has his/it's residence or principal place of business.

Individual applicants and GPP's who are duly accredited by the BOA and SEC, however, shall submit their sduly accomplished application form together with the documentary requirements prescribed in the items (B)(3) of this Section with the Revenue National Accreditation Board (RNAB).

II - WHAT ARE THE DOCUMENTARY REQUIREMENTS?
SECTION 5. ACCREDITATION ( RR 11-2006)
Applicants shall submit togehter with their duly accomplished forms, the following documents:

1. FOR INDIVIDUAL APPLICANTS:

      A. Certificate of registration with the Board of Accountancy (BOA) and current license with the Professional Regulations Commission, if a CPA, or Attorney's Roll Number and Mandatory Continuing Legal Education (MCLE) Compliance Number, if a Lawyer.

     B. Certificate of membership in Good Standing with his/her/its PICPA Chapter or ACCPA (for  CPAs) or Integrated Bar of the Philippines (for lawyers)

    C. Certificate of Good Moral Character issued by two (2) disinterested person, who are either member of the Bar or Certified Public Accountant of good standing; and

       D. If non Certified Public Accountant (CPA):
              1. Certified copy of transcript of records from the university or college showing compliance with at least eighteen (18) units in accounting or taxation as prescribed in Section 4 (A) (2).

           2. Written certification of continuing professional education (CPE) units of at least six (6) hours per year or total of eighteen (18) hours for the three years in taxation conducted by BIR ( ex. Revenue Regions, Revenue District Offices, etc.) or from private institutions ( ex.tax/auditing firms, educational or training institutions, professional organization, etc.) where the number of training hours earned are printed on the certificates and obtained not more than a year prior to the application/renewal for accreditation.


2.  FOR THE PARTNERS, DIRECTORS, OFFICERS, OR DULY AUTHORIZED REPRESENTATIVES OF GENERAL PROFESSIONAL PARTNERSHIP AND INCORPORATED ENTITIES ENGAGED IN ACCOUNTING AND TAX CONSULTANCY.

             A. Certificate of Good Moral Character issued by two (2) disinterested person, who are either member of the Bar or Certified Public Accountant of good standing; and

           B. Other applicable requirements for an individual applicant, or in lieu thereof . certification under oath by the managing partner(s) that the applicant acting for the firm possesses all the qualifications prescribed under Section 4(A) of these regulations.

      C. For those partners, Directors, Officers or duly authorized representatives of General Professional Partnership duly registered with the SEC, in addition to the above documentary requirements, a certification from the BOA of the said Partner, Director, Officers or duly authorized representative is a CPA. Provided, however, that the requirements under letters a,b and c of Section 5(B)(1) hereoof need not be submitted if the Professional Partnership can submit a certified true copy of it's SEC Certificate of Accreditation as well as BOA Certificates of Registration of all the partners, officers, and representatives of the Professional Partnership of CPA's.

             D. List of all current partners, directors, officers, associates or representatives duly authorized by the GPP to act on it's behalf in representing it's client before the BIR.


3. FOR THE INDIVIDUAL AND GPP'S ACCREDITED BY BOA AND SEC.

           A. Certified true copy of BOA Certificate of Registration

          B. Certified true copy of SEC Certificate of Accreditation.


III- PROCESSING FEE

Each applicant shall pay a non refundable processing fee of Five hundred pesos ( P 500.00) upon filing of his application for accreditation. If the applicant is a general professional partnership (GPP), the fee shall be paid by each partner and authorized representative thereof. In the case of incorporated entities engaged in accounting and tax consultancy services, the fee shall be paid by each of the applicant  officers or designated representative thereof.

EFFECTS OF ACCREDITATION
(Section 9 of RR 11-2006 is hereby amended to read as follows, RR 14-2010)

Only those Tax Agents/Practitioners. Partners or officers of General Professional Partnership, or officers or Directors of corporate entities engaged in tax practice who have been issued Certificate of Accreditation or ID card shall be allowed to represent a taxpayer or transact business with the Bureau of Internal Revenue in representation of a taxpayer for the purpose defined in this regulations. THE COMMISSIONER OR HIS AUTHORIZED REPRESENTATIVE SHALL ONLY CONSIDER AS VALID DOCUMENT /ATTACHMENTS TO TAX RETURNS, INFORMATION RETURNS, OR OTHER STATEMENTS OR REPORTS REQUIRED BY THE CODE OR REGULATIONS, THE FINANCIAL STATEMENTS PREPARED, SIGNED AND CERTIFIED BY DULY ACCREDITED TAX PRACTITIONERS. The BIR can refuse to transact official business with tax practitioners who are not accredited before it and shall require that certain official statements such as returns, financial statements, reports, protests, request for ruling, official correspondence and other statements, paper, documents filed on behalf of a taxpayer be signed  or certified persons which shall bear the following information below the signature of the latter.

A. For individual's (CPA's, member of GPP's and others)
           1. Tax Identification Number (TIN) and
           2. BIR Accreditation Number, Date of Issue, and Date of Expiry

B. For members of the Philippine Bar (lawyers)
         1. Tax Identification Number (TIN)
         2. Attorney's Roll Number 
        3. Mandatory Continuing Legal Education (MCLE) Compliance Number; and
        4. BIR Accreditation Number, Date of Issue, and Date of Expiry

If you need assistance, tax advice and tax help, contact us TAXINSIDER



Source: BIR Revenue Regulation Number 11-2006
             BIR  Revenue Regulation Number 14-2010

Freelancer's guide to paying tax - Part 1

FREELANCER'S GUIDE TO PAYING TAX 
by: Ione Baron-Mejia

Image from rabidbi.com

"Freelance ain't free therefore you're income's taxable."

"Tulungan mo naman ako sa tax ko." "Ano bang gagawin ko? " "Pano ba mag online" "Pwede bang ikaw na lang gumawa ng tax ko? " These are the things i usually here from my friends who are also freelancers. I figured, i better write about this,  so the next time i hear  another soul lost on what to do with their tax, i'm just going to send them link,  to this blog, makes life a little easier. This is also to help other freelancers in dilemma as to what and how to pay their taxes. 

First things first.

Anong klaseng taxpayer ka muna?

There are two major kind of taxpayers:

I. Individual

II. Corporation

Ang mga freelancer ay Individual taxpayer.

May dalawang klase ang Individual Taxpayer

Individual taxpayer can be classified as:

I-A. Citizen

I-B, Alien

 Ang mga freelancer ay classified na Citizen na Individual Taxpayer.

IA - CITIZENS are classified as:

IA-1.Resident citizen - Pilipino na nakatira at nagtratrabaho sa Pilipinas

IA-2. Non resident citizen - Pilipino na hindi nakatira at nagtratrabago sa ibang bansa. 

    IA2-a. Immigrants

    IA2-b Employees of foriegn entities on apermanent basis

    IA2-c. Overseas Contract workers or (CW)

Freelancers are classified as Resident Citizen

 Aliens are either resident of nonresident. Nonresident aliens are further divided into engaged or not engaged in trade or business in the Philippines. If an alien has an aggregate period of stay here in the Philippines for more than 180 days he shall be considered as a “nonresident alien doing business in the Philippines.”

What are the sources of income of resident citizens taxable under the Philippine law?

Ans. All income derived from sources within and without the Philippines.

In short lahat ng kita mo sa Pilipinas o sa ibang bansa man yan taxable yan.

Ngayon alam na natin kung ano ang taxable income mo,  kung ano ang kailangan mong ireport na kita.

Tanong: Freelancer artist ka, may raket ka sa Pilipinas, meron ka ring raket sa ibang bansa.  Kita lang ba sa Pilipinas ang taxable? Mali. Lahat ng kita mo kahit saan man yan sa mundo kinita,  taxable yan under Philippine law. 

What are the sources of income of  nonresident citizens taxable under Philippine law?

A nonresident citizen is taxable only one income derived from sources within the Philippines. Thus an immigrant, employee of a foreign entity on permanent basis and OCW will be taxed only on income derived from the Philippines. His income from the country where he is working will not be taxed in our country. 

In short, kung nonresident citizen: Kita lang sa Pilipinas ang taxable same with aliens. 

What sources of income of  aliens taxable under Philippine law?

An alien individual, whether a resident or not of the Philippines, is taxable only on income derived from sources within the Philippines.

Self employed taxpayers are those individual who receive income from business ( sole proprietorship)  or/and  from practice of profession ( registered or not registered with the PRC (Professional Regulation Commission) such as CPA's, lawyers, doctors, engineers, architects, dentist,artists, bloggers, media practitioners). Freelancers are self employed taxpayers.  

SELF EMPLOYED KA OR FREELANCER, WHAT'S NEXT?


First thing to do is to register in BIR. 


First: Go to BIR's office. I assume you already have your TIN. If not, you have to register here first.

https://ereg.bir.gov.ph/ereg/welcome.do


Your Revenue District Office ( RDO) depends on your business address that you will be using. If you are a freelancer and working at home, you can use your residential address as your business address. ( Isa yan sa laging tinatanong wala naman akong business address, kung wala kang business address yong home/ residential address mo ang gamitin mo, pwede yon. Check your RDO below. 

http://www.bir.gov.ph/index.php/contact-us/directory/revenue-district-offices.html


2nd:  the BIR will ask you for your license if you tell them your are applying as self employed or a professional. You can show them your PRC ID, if your  industry doesn't require one, just inform them about it, they will understand.


3rd: Fill up a registration form, you will have to use BIR form 1901 and BIR form 605, which is payment form. You need to pay (P500.00 ) five hundred pesos for your registration fee. 
Where do you pay? You need to go to the authorized bank of your RDO, these are the banks usually within your area, check the link below. 

http://www.bir.gov.ph/index.php/list-of-authorized-agent-banks.html



4th:  You need to submit the following documents together with the BIR for 1901.
1. Prepare your registered TIN Number
2. Xerox copy of your birth certificate
3.  If your are married, xerox copy of your marriage certificate and birth certificate/s of your dependents/children
4. Xerox copy of your ID with name, address and signature.
5. Xerox copy of your proof of address.
( The BIR may ask if your are renting your office. They will require you to submit  lease contract if you are renting your office if you have an office,  then you have to pay docs stamps for that.)

5th: Register your books.
Journal, Ledger, Cash receipt Journal and Cash Disbursement Journal
( Buy these from bookstore then bring it to BIR para tatakan nila)


6th: Look for an accredited printer who can assist you with printing your invoices. Or you can ask BIR personnel for recommendation, usually may kakilala sila para mas mabilis.



You can allocate at least one whole day for these.  Go to the BIR office with the BIR form 1901, BIR form 605 for registration fee together with the required docs and the books. Then go to the bank for the registration fee, go back to BIR and submit the payment form. They will then inform you when to go back for the Certificate of Registration. 


Congratulations! You are now regisitered in BIR. You can now start paying your taxes. :-)



If you need assistance or tax help, contact us @ TAXINSIDER.

HOW TO COMPUTE WITHHOLDING TAX ON COMPENSATION

HOW TO COMPUTE WITHHOLDING TAX ON COMPENSATION
by: Ione Baron Mejia

Tanong ni empleyado, "Tama kaya ang computation ng withholding tax ko?"

Una, bago tayo mag compute. Ano ba yong withholding tax? Withholding tax,  eto yong tax sa kinikita mo ng gobeyerno na binabawas sayo ng employer mo kada buwan. Yong employer mo ang nangungulekta sayo para sa gobeyerno. 

Now, this is how to compute withholding tax on compensation.

Step 1: Determine kung talagang dapat ka bang withholdan o hindi.

Please be informed that if you are a minimum wage earner (MWE) who is purely earning compensation income you are not subject to income tax, therefore you are not subject to withholding tax. Kaya dapat hindi ka binabawasan  o hindi ka nabawasan ng withholding tax. In short, ang mga minimum wage earner (MWE) ay walang withholding tax.

Then, who are subject to withholding tax?

Those who are earning above minimum, (except those that are expressly enumerated by the National Internal Revenue Code), their income are taxable and are therefore subject to withholding tax.



Step 2: Presenting the Withholding Tax Table. Eto ang gagamitin natin para sa pag compute ng withholding tax nyo. (Please dont be intimidated with it, madali lang intindihin yan.)

Legend:
Z - Zero exemption
S - Single
ME - Married Employee 1;2;3;4- Number of qualified dependent children
S/ME  =  P50,000 
Each Working employeeQualified Dependent Child = P25,000 each but not exceeding four (4) children

( Yan po ang ibig sabihin ng Z,S at ME madali lang di ba)

1. DAILY TAX TABLE - SHOULD BE USED BY EMPLOYERS USING DAILY PAYROLL PERIOD
2. WEEKLY TAX TABLE - SHOULD BE USED BY EMPLOYERS USING WEEKLY PAYROLL PERIOD
3.SEMI-MONTHLY TAX TABLE - SHOULD BE USED BY EMPLOYERS USING SEMI MONTHLY PAYROLL PERIOD
4. MONTHLY TAX TABLE - SHOULD BE USED BY EMPLOYERS USING MONTHLY PAYROLL PERIOD

( Para naman yan sa nakahighlight ng blue )

Ngayon alam mo na, above minimum ka, so may income tax ka therefore may withholding tax ka. Second, kailan ba kayo nagswesweldo? daily, weekly, semi monthly, monthly. Third, determine/compute total compensation you receive, from there determine your regular taxable compensation and your supplementary taxable compensation.


STEP 3:

Determine the total monetary and non monetary compensation you have received for the payroll period. Excluding the ff below: 
1. 13th month pay, 
2. productivity incentives, 
3. Christmas bonus, 
4. other benefits, 
5. your contribution to SSS or GSIS, HDMF, Philhealth.

( Gross benefit which are received by officials and employees of both public and private entities in the amount of thirty thousand pesos (P 30,000) or less is exempted from income and withholding tax.)


Step 4: Determine your taxable and non taxable compensation income.

What is taxable ? 
The taxable income refers to all remuneration paid to an employee not otherwise exempted by law from income tax and consequently from withholding tax.

What is non taxable?
The non-taxable income are those which are specifically exempted from income tax by the Code or by other special laws as listed in Sec.2.78.1(B) hereof 
example: 1. benefits not exceeding P30,000, 
               2. non-taxable retirement benefits 
               3. separation pay

After you determine your taxable compensation income, you segregate it into:
1. Regular taxable compensation income
    A. basic salary
    B. fixed allowances for representation
    C. transportation and other allowance you receive per payroll period
2. Supplementary compensation income
    A. Commission
    B. Overtime pay
    C. Taxable bonus
    D. Other taxable benefit

Yong regular mong narereceive kada payroll ang regular compensensation income mo, ang supplementary eh yong narereceive mo o dagdag na binibigay sayo pwera sa regular na narereceive mo. Importante ma determine nyo to kasi ang regular taxable compensation income ang gagamitin mong amount sa withholding tax table.


Example:

1. Juan Dela Cruz, married with two dependent. 
    (Check the legend in the taxable table = ME2 kasi married at 2 dependent)

2.  He is receiving eighteen thousand basic salary ( P 18,000), received semi monthly. = 9,000   ( Regular taxable compensation income)  
    ( For example purpose amount of SSS, Philhealth, and others is 1,000)

3.  Overtime pay two thousand pesos.( P 2,000)
      ( Supplementary taxable compensation income)

4. Commission of five thousand pesos ( P 5,000)
       (Supplementary taxable compensation income)
     

Basic pay            9,000 - 1,000 = 8,000
 (semi monthly basic pay less non taxable SSS and others)


Overtime pay       2, 000
Commission         5,000
Total                    15,000


 1. Go to the table in semi monthly section
 2. See number 2 ME2
 3. Check compensation level line 7,083  (base sa 8,000 na regular taxable compensation)
 4. Compensation level 7,083   
     Excess = 7,917   (Total 15,000 - 7,083 compensation level line)   
     % on excess tax = 20%     ( base on tax table)
 5. Tax on compensation level = 354.17
     Tax on the excess = 1,583.40  (7,917 x .20)
     Total withholding tax = 1,937.57  (354.17 + 1,583.40)


Eto ang ginawa ko para makuha ang total withholding tax:

Total withholding tax is P 1,937.57. Pano nakuha, pakicheck yong table, punta ka sa semi monthly tapos hanapin mo yong ME2. Bakit ME2 kasi married employee si Juan Dela Cruz at 2 ang dependent. Tapos tingan mo yong linya from ME2, hindi ka pwede sa 5,417 kasi masyadong mababa hindi ka rin pwede sa 10.000 at sobra ka naman sa 8,000 ang compensation level mo ay sa 7,089, syempre may sobra ang excess eh 7,917. Pano nakuha yong 7,917 eto yong total compensation mo na 15,000 minus 7,083 na compensation level line. Ngayon tingnan mo sa taas ng 7,083 naka lagay don yon tax sa compensation level mo na 7,803 ang tax nyan eh 354.17 tapos ang tax naman sa excess na 7,917 eh 1,583.40. Paano nakuha yong 1,583.40, imultiply mo yong 7,917 x 20%  excess tax ang sagot dyan eh 1,583.40. Ngayon i add mo yong 354.17 na tax sa compensation level at yong 1,583.40 na tax sa excess yan yong total withholding tax mo 354.17 plus 1,583.40 equals 1,937.54.

1,937.57 dapat ang ibabawas ng employer ni Juan Dela Cruz sa sweldo nya. Yon ang tax nya na ibabayad sa government. In totally unrelated issue, yong MRT/LRT daw magtataas ang pamasahi, saan kaya napupunta yong tax na winiwithhold sa mga empleyado? Syempre sa mga government projects.hehehehe.



For comments, questions or  tax help please email me at yourtaxaid@gmail.com or ione.mejia@gmail.com