Compensation Withholding Tax

Compensation Withholding Tax


How to Compute your Philippine BIR Compensation Taxes?

The following is the required information for you to compute your income tax:
  1. Social Security System (SSS) Contribution for the month
  2. Philippine Health Insurance Corporation (PHIC) Contribution for the month
  3. Home Development Mutual Fund (HDMF) Contribution for the month
  4. Allowances and other types of compensation
Here’s an easy way how to compute employee compensation/withholding taxes for the month:

Sample:

  1. Basic Salary:                                                P 40,000.00
  2. Tardiness/Undertime/Absences:                        357.83
  3. SSS Contribution:                                                        581.30
  4. PHIC Contribution:                                                     437.50
  5. HDMF Contribution:                                                  100.00

Get your Taxable Income:

Monthly Basic Pay + Overtime Pay + Holiday Pay + Night Differential - Tardiness - Absences - SSS/PHIC/HDMF Contributions

Sample computation based on the illustration provided above:

P 40,000 – P 357.83 - P 581.30 – P 437.50 – P 100.00

Taxable Income is P 38,523.37

From here, we can now compute the withholding tax. Please refer to the BIR tax table below:

Under Monthly Compensation Level (CL), find the compensation range that your taxable income belongs to. 

In this case, your taxable income is P 38,523.37 and it belongs to the compensation range of “P33,333.00 to P 66,666.00.”
(Column 3 in Monthly portion)

To compute:

Taxable Income – Lowest Compensation Range Amount x 20% + P 2,500.00
(P 38,523.37 – P 33,333.00) x 25% = P 1,297.59 + P 2,500.00 = P 3,797.59

The total tax for the month is P 3,797.59

Remember, the compensation tax is always based on your taxable income. 

Effective January 1, 2023, and onwards:

TableDescription automatically generated

Reference: https://www.bir.gov.ph/index.php/tax-information/withholding-tax.html 

Please raise a ticket to Finance for any concerns or clarifications.

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