GROSS INCOME

Compensation Income
Florendo Dauz Jr., CPA, MBA, MSA
Compensation Income
Employee Benefits received from employer (Employer-
Employee Relationship)
Not considered employees:
1. Consultants
2. Directors with no management function
3. Talents and artists
Types of employees as to function:
1. Managerial
2. Supervisory
3. Rank and File
Compensation Income
Types of Employees as to Taxability
1. Minimum wage earners – exempt from income tax
2. Regular employees- subject to regular progressive income tax
Compensation Income
Non-Taxable Compensation
1. Mandatory Deductions – SSS, GSIS, PHCIC, HDMF, Union Dues
2. Exempt Benefits:
a. Excluded Benefits under NIRC or Special Laws
b. Benefits under treaty or international agreements
c. Benefits necessary to the trade business or conduct of
profession of the employer
d. Benefits for the convenience or advantage of the employer
Non-Taxable Compensation
1. Remunerations received as incidents of employment
a. Exempt retirement benefits under RA7641 including exempt
gratuities to government officials and employees.
b. Exempt termination benefits
c. Benefits from US Veteran Administration
d. Social security, Retirement gratuities, pensions, and similar benefits
from foreign government agencies and other institutions, private or public
e. Benefits from SSS
f. Benefits from GSIS
2. De minimis benefits (small benefits)
3. 13th Month pay and other benefits not exceeding P90,000
13th Month Pay and Other Benefits
1. 13th Month Pay
Private employees: 1 month salary or Annual Basic Salary divide
by 12.
Government employees: 1 month Salary + P5,000 cash gift
2. Other Benefits
a. Christmas bonus of private employees
b. Cash gifts other than Christmas or anniversary gifts of private employees
c. Additional compensation allowance for government personnel
d. 14th, 15th month pay
e. Other fringe benefits of rank and file employees
Other Fringe Benefits
1. Employee personal expenses shouldered by the employer
2. Taxable de minimis benefits:
a. Excess de minimis
b. Benefits not included in the de minimis list
Tax treatment:
Rank and file employees – included to taxable compensation income
Managerial/ Supervisory – Subject to fringe benefit tax (32%, paid by
employer)