LECTURE ON INDIVIDUAL TAXPAYER

HOW DO WE USE THE GRADUATED INCOME TAX TABLE FOR EMPLOYEES AND
PERSON ENGAGED IN BUSINESS AND PROFESSION IN THE PHILIPPINES UNDER
THE TRAIN LAW? Train law was effective on Jan 1, 2018 (Train law is more on
Individual taxation) CREATE LAW focusses on corporation but touches also on
individual and business Tax) OLD LAW IN TAXATION IS R.A 8424 KNOWN AS
“COMPREHENSIVE INCOME TAX LAW OF 1997” EFFECTIVE JAN 1, 1998.

KINDS OF INDIVIDUAL TAXPAYER

INDIVIDUAL TAXPAYERS ARE COMPOSED OF EMPLOYEE AND PERSON ENGAGED IN BUSINESS AND
PROFESSION.

a) EMPLOYEE IS COMPOSED OF:

1. EMPLOYEE RECEIVING MINIMUM WAGE WHICH IS EXEMPT FROM WITHHOLDING

INCOME TAX - (P570 IN METRO MANILA) BASED OLD LAW (RA 8424 known as
Comprehensive Income tax Law in 1997, effective Jan 1, 1998)

2. EMPLOYEE RECEIVING ANNUAL SALARY OF P250,000 AND BELOW IS ALSO EXEMPT

FROM INCOME TAX BASED ON TRAIN LAW. P250,000/12=P20,833.33 MONTHLY

3. EMPLOYEE EARNING ABOVE P250,000 ANNUALLY IS SUBJECT TO INCOME TAX BASED ON

GRADUATED TAX TABLE PROVIDED BY TRAIN LAW

WHEN WE SPEAK OF TAX GENERALLY WE REFER TO INCOME TAX. INCOME TAX IS A TAX ON INCOME.

a. ONE EMPLOYER ONLY - THE EMPLOYER IS RESPONSIBLE TO FILE INCOME TAX

RETURN (ITR) OF EMPLOYEE ON APRIL 15 OF EVERY YEAR CALLED SUBSTITUTED
FILING OF INCOME TAX (FROM JANUARY 1 TO APRIL 15 OF EVERY YEAR).
b. IF THE TAXPAYER HAS MULTIPLE INCOME OR AN EMPLOYEE HAS BUSINESS AS
ADDITIONAL INCOME, ALL HIS INCOME WILL BE SUBJECT TO INCOME TAX
WHETHER HE IS A MINIMUM WAGE EARNER OR WITH INCOME EXCEEDING
P250,000. FILING OF ITR SHOULD BE DONE BY THE TAXPAYER HIMSELP.

SALARY FROM MINIMUM WAGE…………………………… 156,000

+ NET INCOME FROM SMALL BUSINESS…………………200,000
GROSS INCOME………………………………………………………356,000
LESS: EXEMPTION…………………………………………………. 250,000 TRAIN LAW
NET TAXABLE INCOME …………………………………………..106,000 BASIS OF THE TAX

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 4. EMPLOYEE RECEIVING ANNUAL SALARY OF MORE THAN P250,000 WHICH IS SUBJECT TO
WITHHOLDING INCOME TAX BY THE EMPLOYER or your employer will deduct income tax
from your salary called Withholding Income Tax System.

5. EMPLOYEE WHOSE SALARY IS SUBJECT TO FINAL WITHHOLDING INCOME TAX SUCH AS

NON RESIDENT ALIEN NON-ENGAGED IN BUSINESS IN THE PHILIPPINES AND SPECIAL
ALIEN TAXPAYERS.

b) SINGLE PROPRIETORSHIP IS COMPOSED OF:

1. PERSON ENGAGED IN BUSINESS

RESTAURANT OWNER, PARLOR OWNER, HARDWARE OWNER, ON-LINE BUSINESS,

OWNER OF COMPUTER SHOP, RESORT OWNER, GROCERY.

NET INCOME = TOTAL REVENUE-TOTAL EXPENSE AND NET INCOME IS SUBJECT TO

INCOME TAX

NET LOSS= IF TOTAL EXPENSES IS HIGHER THAN TOTAL REVENUE = NO INCOME TAX

2. PERSON ENGAGED IN PROFESSION-

A. A CPA WHO MANAGED HIS OWN ACCOUNTING FIRM

B. A MARKETING MAN WHO MANAGED HIS CONSULTANCY SERVICES

C. A PROFESSIONALS WHO ARE INSPIRATIONAL SPEAKERS

WHAT IS WITHHOLDING INCOME TAX ON EMPLOYEE?

THIS IS THE AMOUNT OF INCOME TAX DEDUCTED FROM THE SALARY OF EMPLOYEE BY THE
EMPLOYER AND WITHHELD BY THE EMPLOYER UNTIL FINAL PAYMENT IS MADE TO BIR’S DEPOSITORY
BANK. IT IS WITHHELD BY THE EMPLOYER THAT IS WHY IT IS CALLED WITHHOLDING INCOME TAX
SYSTEM.

BIR’S DEPOSITORY BANK- CHINA BANK, UNION BANK, UCPB, LANDBANK, DBP, VETERANS BANK, BDO
AND RCBC

HOW DO WE TAXED BY THE GOVERNMENT AS EMPLOYEE? THRU WITHHOLDING INCOME TAX SYSTEM

KINDS INDIVIDUAL TAXPAYER

1. RESIDENT CITIZEN - A FILIPINO CITIZEN WHO ARE IN THE PHIL. WORKING AND DERIVING
INCOME IN THE PHIL. AND ABROAD. THE TAXABILITY OF INCOME IS COMPOSED OF INCOME
EARNED FROM THE PHIL. AND ABROAD.
INCOME FROM PHIL…………………………………..PXX
ADD: INCOME IN ABROAD…………………………..XX
GROSS INCOME……………………………………………XX
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 LESS: OPERATING EXPENSE………………………….XX
NET INCOME FROM ALL SOURCES………………PXX
LESS: EXEMPTION………………………………………250,000
NET TAXABLE INCOME………………………………PXX
INCOME TAX ?

INCOME TAX DUE IN PHIL………………………….. P XX P2BILLION 4B

LESS: INCOME TAX PAID IN USA………………..…...XX 3B 3B
INCOME TAX STILL DUE………………………….………XX 0 1B

2. NON-RESIDENT CITIZEN – A FILIPINO CITIZEN WHO ARE PRESENTLY IN ABROAD AS OFW,

IMMIGRANT OR FILIPINO WITH PERMANENT ADDRESS IN ABROAD AND DERIVING INCOME
THEREIN. IN THE PHILIPPINES THEY ARE EXEMTED FROM INCOME TAX ON EARNINGS ABROAD.
EX. SEAMAN, OFW, IMMIGRANT.

WINNINGS FROM LOTTO AND PCSO- R.A 8424 - EXEMPTED

WINNINGS FROM LOTTO AND PCSO ARE SUBJECTS TO 20% FINAL TAX UNDER TRAIN LAW

FILIPINO CITIZEN WHO HAPPENED TO BE AN AMERICAN CITIZEN ALSO (DUAL CITIZEN) HE WON
LOTTO IN THE PHIL. HE IS EXEMPTED IN THE PHIL ALL HIS WINNINGS BUT IN AMERICA HE IS
SUBJECT TO TAX. UPON LEARNED BY PRES. DETERTEHE WANTS LOTTO TO BE TAXED.

3. RESIDENT ALIEN - A FOREINERS WHO STAYS IN THE PHIL MORE THAN A YEAR AND DERIVING
INCOME IN THE PHIL. ALL INCOME IN THE PHIL. IS SUBJECT TO INCOME TAX.

4. NON-RESIDENT ALIEN- ENGAGED IN BUSINESS IN THE PHIL. – AN ALIEN WHO STAYS IN THE
PHIL. FOR MORE THAN 180 DAYS AND DERIVING INCOME IN THE PHILIPPINES. ALL INCOME IN
THE PHIL. IS SUBJECT TO INCOME TAX.

5. NON-RESIDENT ALIEN - NOT ENGAGED IN BUSINESS IN THE PHIL.-AN ALIEN WHO STAYS IN THE
PHIL FOR LESS THAN 180 DAYS AND DERIVING INCOME IN THE PHILIPPPINE. ALL INCOME
EARNED IN THE PHIL. IS SUBJECT TO INCOME TAX.
EXAMPLE: CONCERT ARTIST

6. SPECIAL ALIEN TAXPAYER - EMPLOYEE OF CERTAIN COMPANY - FOREIGN CORPORATION

PHIL GOV’T THRU BIR identified ALIEN TAXPAYER BASED ON THEIR LENGTH OF STAY IN THE
PHILIPPINES.

IN THE EYES OF THE GOVERNMENT WHAT MAKES THEM A NON-RESIDENT CITIZEN?

CLASSES OF CORPORATION

1. DOMESTIC CORPORATION - THIS IS FILIPINO CORPORATION, THEY ARE REGISTERED WITH

SECURITY AND EXCHANGE COMMISSION. THE BIRTH CERTIFICATE OF DOMESTIC CORPORATION
IS CALLED ARTICLES OF INCORPORATION. (JURIDICAL PERSONALITY)
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 JURIDICAL PERSONALITY OF A CORPORATION. THE CORP IS JUST LIKE A HUMAN BEING BECAUSE
THEY HAVE THE POWER TO:

a) own real properties in the Phil., registered in the corporation name

b) the right to sue and be sued

c) to maintain bank deposit registered in their corporate names

d) the legal life is 50 years and renewed every 25 years.

2. FOREIGN CORPORATION- A FOREIGN CORPORATION OWNED BY A FOREIGNER BUT NOT

REGISTERED WITH SEC and THEY ALLOWED TO DO BUSINESS IN THE PHILIPPINES. Example: MAY
BANK, CITY BANK,

WHAT ARE THE TAXES IMPOSED ON INDIVIDUAL TAXPAYER?

1. BASIC TAX OR REGULAR INCOME TAX REPRESENTED BY A TAX TABLE
2. FINAL TAX ON PASSIVE INCOME (PASSIVE INCOME IS INCOME EARNED WITHOUT
EXERTING PHYSICAL EFFORT) (PASSIVE INCOME ARE ENUMERATED BY LAW WITH A
RATE OF FINAL TAX ex. INTEREST EARN FROM BANK DEPOSIT in the phil.
3. CAPITAL GAINS TAX- 2 PARTICULAR TRANSACTIONS
a) ON SALE OR EXCHANGE OF REAL PROPERTY located in the Phil and held as CAPITAL
ASSET. CAPITAL ASSET MEANS PROPERTY NOT USED OR RELATED TO BUSINESS.
THOSE ASSETS USED OR RELATED TO BUSINESS IS CALLED ORDINARY ASSET.
REAL PROPERTY= PROPERTY REFERS PRINCIPALLY TO HOUSE, LAND AND BUILDING.
REAL PROPERTY =PROPERTY ATTACHED TO THE SOIL WITH PERMANENCE AND THE
SOIL ITSELF.
b) ON SALE OR EXCHANGE OF SHARES OF STOCK NOT TRADED IN THE LOCAL STOCK
EXCHANGE CENTER HELD AS A CAPITAL ASSET AND SOLD TO DIRECT BUYER.
(CAPITAL ASSET MEANS ASSET NOT USED IN BUSINESS)
1. SHARES OF STOCK SOLD FROM MAKATI STOCK EXCHANGE - BLUE CHIP STOCKS
LIKE JOLIBEE SHARES, METROBANK SHARES, PNB SHARES, MERALCO SHARES,
PLDT, SAN MIGUEL. STOCK TRANSACTION TAX (BUSINESS TAX)
2. SHARES OF STOCK OF DOMESTIC CORP. NOT TRADED STOCKS WHICH ARE SOLD
DIRECTLY FROM STOCKHOLDER IS SUBJECT TO CAPITAL GAINS TAX (INCOME
TAX) UE, FEU
DEFINE EMPLOYEE

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EMPLOYEE - IS A PERSON EMPLOYED IN A COMPANY WHO IS REQUIRED TO WORK AT LEAST 8
HOUR A DAY FOR A FIXED SALARY UNDER THE EMPLOYER-EMPLOYEE RELATIONSHIP.
PIECE WORKER=PAKYAWAN
INCOME TAX OF AN EMPLOYEES ARE PAID THROUGH SALARY DEDUCTION CALLED
WITHHOLDING INCOME TAX SYSTEM. UNDER THE SYSTEM, THE EMPLOYER IS REQUIRED BY
LAW TO DEDUCT AND WITHHOLD INCOME TAX FROM EMPLOYEE’S SALARY. THE EMPLOYEE IS
THE MOST ABUSED TAXPAYERS, BECAUSE THEY RECEIVED THEIR SALARY ALREADY NET OF
INCOME TAX.
STATUTORY DEDUCTIONS FROM THE SALARY ARE INCOME TAX, SSS, PHILHEATH, PAG-IBIG
PREMIUMS AND UNION DUES. STATUTORY MEANS LAW. STATUTE MEANS LAW.
Statue - statute a written law passed by legislative body or Congress
Statutory rape a rape is considered punishable even the rape have permission from the victim
or parents of the victim.
A Congressmen (reclusion perpertua) - a crime of sex with the minor when the sex is agreed to
both parties, not force, the reason it is considered rape because the minotr is considered to be
too young, 16 years old and below to legally consent to have sex or sexual contact. If the
victim is 17 years old and above there is ALSO crime commited BUT SUBJECT SETTLEMENT
UPON WISH BY THE VICTIM.
STATUTORY RAPE=RECLUSION PERPETUA - LIFE SENTENCE

GRADUATED TAX TABLE

FIRST TAX TABLE
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GRADUATED INCOME TAX TABLE UNDER THE TRAIN LAW, TAX TABLE 0% TO 35%
EFFECTIVE JANUARY 1, 2018 TO DECEMBER 31, 2022

P250,000 AND BELOW……………………………………………… 0% / EXEMPT FROM WITHHOLDING TAX (HINDI PWEDE KALTASAN)

P250,000 – P400,000 ………………………………………. 0 + 20% IN EXCESS OF P250,000

P400,000 – P 800,000……………………………………..P30,000 + 25% IN EXCESS OF P400,000

P800,000 - P2,000,000……………………………………P130,000 + 30% IN EXCESS OF P800,000

P2,000,000 – P8,000,000…………………………………P490,000 + 32% IN EXCESS OF P2,000,000

P8,000,000 - ANY AMOUNT………………………….P2,410,000 + 35% IN EXCESS OF P8,000,000

Sebastian= 28,000/20%+250,000= 390,000

390,000-250,000=140,000x 20% =28,000

With that principle there are many question to be asked?

Assume An employee received an annual salary of P870,000 which is net of 20% withholding
income tax, how much the gross income of the taxpayer and how much the income tax still
due?
Gross income (870,000/80%)………………………….P1,087,500 (100% gross income )
Income tax (1,087,500-800,000x30%+130,000) 216,250
Less: (1,087,500-870,000)………………………………P 217,500 = 20%
Income tax due (refund)……………………………………( 1,250)

GROSS INCOME …………………………….P 400,000

LESS: EXEMPTION……………………………. 250,000
Net taxable income…………………………P 150,000 X .20= P30,000 IN A YEAR

GROSS INCOME 800,000

LESS: ………………………………………….400,000……………….P30,000
EXCESS……………………………………….400,000 X .25........ 100,000
TOTAL……………………………………………………………………….P130,000

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GROSS INCOME ……………………………..P 2,000,000
LESS:……………………………………………….. 800,000…………….P130,000
EXCESS……………………………………………….1,200,000 X .30= 360,000
TOTAL TAX……………………………………………………………………….. 490,000

GROSS INCOME WITHHOLDING TAX

1 560,000 (560,000-400,000X 25%+30,000) P 70,000
2. 880,000(880,000-800,000 X 30%+130,000) P154,000
3. 1,080,000 (1,080,000-800,000 X30%+130,000) P 214,000
4. 6,000,000 (6,000,000-2,000,000X.32+490,000) P 1.770,000
5. 4,000,000-(4,000,000 - 2,000,000X 32%+ 490,000) P1,130,000
6. 12,000,000 (12,000,000-8,000,000X 35%+2,410,000) P 3,810,000
7. 560,000 (560,000-490,000/.32+2,000,000)-2,218,750 560,000
8. 28,000
Cagadas 2,000,000;
Gross income (all income in a year) compensation (salary)
Compensation income- income derived from EMPLOYER-EMPLOYEE RELATIONSHIP
THE GROSS INCOME OF EMPLOYEE IS CALLED SALARY, WAGES OR COMPENSATION INCOME.
Grosss compensation income = total salary
THE GROSS INCOME OF PERSON ENGAGED IN BUSINESS OR PROFESSION IS CALLED NET
INCOME OR NET PROFIT. (NET PROFIT = IF TOTAL REVENUE IS HIGHER THAN TOTAL EXPENSE)
THIS TAX TABLE IS FOR EMPLOYEE, PERSON ENGAGED IN BUSINESS AND PERSON ENGAGED
IN PROFESSION, EXCEPT CORPORATION AND PARTNERSHIP. ESTATE AND TRUST CAN USE
ALSO THIS TAX TABLE.
ESTATE- AS A TAXPAYER ITSELF HAS A TIN NUMBER ISSUED BY BIR. ITO AY MINANA NG MGA
TAGAPAGMANA NA HINDI KAYANG PANGASIWAAN YUNG KANILANG MINANA DAHIL SILA AY
MINOR HEIRS, OR WITH PHYSICAL OR MENTAL DEFECTS HEIR. ITO AY PAMAMAHALAAN NG
ADMINISTRADOR OR EXECUTOR APPOINTED BY THE COURT OR APPOINTED IN THE LAST WILL
AND TESTAMENT. DAHIL ANG ESTATE AY KUMIKITA NG INCOME KAYA NAGING TAXPAYER.
OR CAN CAN BE CALLED ESTATE UNDER ADMINISTRATION.
TRUST OR TRUST FUND UNDER ADMINISTRATION- THE TRUST FUND IS THE TAXPAYER
HIMSELF. IBIG SABIHIN MERON SYANG TIN ACCOUNT ISSUED BY BIR. ITO’Y MGA PONDO NA
BINIGAY SA MGA SA MGA DONEE NG DONOR. IT SHORT, THIS IS DONATION TO THE
BENEFICIARY. SINCE THE FUND IS EARNING INTEREST OR INCOME, IT BECOMES A TAXPAYER
AND THE FUND IS UNDER ADMINISTRATION.

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THE INCOME TAX OBTAINED FROM THE GRADUATED TAX TABLE IS CALLED BASIC INCOME
TAX UNDER THE TRAIN LAW WHICH IS KNOWN AS “TAX REFORM FOR ACCELARATION AND
INCLUSION” EFFECTIVE JANUARY 1, 2018, UNDER REPUBLIC ACT 10963, SIGNED BY
PRESIDENT DUTERTE ON DECEMBER 19, 2017. OLD LAW IN TAXATION IS R.A. 8424 KNOWN
AS COMPREHENSIVE INCOME TAX LAW OF 1997, EFFECTIVE JANUARY 1, 1998.
THE FIRST GRADUATED TAX TABLE OUT OF THREE TAX TABLES EFFECTIVE FROM JANUARY 1,
2018 TO DECEMBER 31, 2022. THE TAX TABLE WILL BE CHANGED STARTING JANUARY 1, 2023
TO THE ADVANTAGE OF THE TAXPAYER BECAUSE OF LOWER TAX DETERMINATION. THE TAX
TABLE CAN BE ALSO CALLED TAX TABLE 0-35%.
FIRST TAX TABLE
GRADUATED INCOME TAX TABLE UNDER THE TRAIN LAW, TABLE 0% TO 35%
EFFECTIVE JANUARY 1, 2018 TO DECEMBER 31, 2022

P250,000 AND BELOW……………………………………………… 0% / EXEMPT

P250,000 – P400,000 ………………………………………. 0 + 20% IN EXCESS OF P250,000

P400,000 – P 800,000……………………………………..P30,000 + 25% IN EXCESS OF P400,000

P800,000 - P2,000,000……………………………………P130,000 + 30% IN EXCESS OF P800,000

P2,000,000 – P8,000,000…………………………………P 490,000 + 32% IN EXCESS OF P2,000,000

P8,000,000 - ANY AMOUNT………………………….P2,410,000 + 35% IN EXCESS OF P8,000,000

EXPLANATION OF THE TAX TABLE

ON THE FIRST LEVEL, IF THE GROSS INCOME OR NET TAXABLE INCOME OF AN EMPLOYEE IS
P250,000 AND BELOW ANNUALLY, THE INCOME IS EXEMPT FROM WITHHOLDING INCOME
TAX. YOU WOULD NOTICE THE TERM GROSS INCOME IS SYNANIMOUS WITH THE TERM NET
TAXABLE INCOME, BECAUSE OF ABSENCE OF ANY DEDUCTION FOR EMPLOYEE AS TAXPAYER.
MEANING, HIS ENTIRE INCOME FROM EMPLOYMENT HAS NO DEDUCTION FOR INCOME TAX
COMPUTATION.
ON THE SECOND LEVEL, BETWEEN P250,000 AND P400,000, THE FIRST P250,000 IS EXEMPT
FROM WITHHOLDING TAX, WHILE THE EXCESS OF P400,000 OVER P250,000 SHALL BE
MULTIPLIED TO 20%. ASSUMING THE GROSS INCOME IS P350,000 IN A YEAR. THE TAX IS
COMPUTED AT P350,000 - P250,000 = P100,000 X 20%, THE INCOME TAX DUE IS P20,000.
GROSS INCOME ………………………………………P 350,000
LESS: 250,000 BRACKET………………………………250,000……………….P 0
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EXCESS…………………………………………………… P 100,000 X 20% …………20,000
INCOME TAX ……………………………………………………………………………….. 20,000

P350,000 - P250,000 X 20% + 0= P20,000

FOR EMPLOYEE- HIS ENTIRE INCOME (SALARY) FOR THE YEAR IS CALLED GROSS INCOME OR
NET TAXABLE INCOME.
FOR BUSINESSMAN INCLUDING PERSON ENGAGED IN PROFESSION, THE COMPUTATION IS AS
FOLLOWS:
SALES REVENUE (BENTA)……………………………………P XXX
LESS: OPERATING EXPENSE…………………………………….XX
NET INCOME FROM BUSINESS………………………… P XX

NET INCOME IS CALLED GROSS INCOME FOR INCOME TAX PURPOSES OF THE OWNER AND THE
BASIS FOR INCOME TAX USING THE TAX TABLE

P250,000 AND BELOW……………………………………………… 0% / EXEMPT

P250,000 – P400,000 ………………………………………. 0 + 20% IN EXCESS OF P250,000

P400,000 – P 800,000……………………………………..P30,000 + 25% IN EXCESS OF P400,000

P800,000 - P2,000,000……………………………………P130,000 + 30% IN EXCESS OF P800,000

P2,000,000 – P8,000,000…………………………………P 490,000 + 32% IN EXCESS OF P2,000,000

P8,000,000 - ANY AMOUNT………………………….P2,410,000 + 35% IN EXCESS OF P8,000,000

ON THE THIRD LEVEL, BETWEEN P400,000 TO P800,000. THE FIRST P400,000 HAS A TAX OF
P30,000, AND THE EXCESS OF P400,000 (800,000-400,000) SHALL BE MULTIPLIED TO 25%
WHICH IS P100,000. THE INCOME TAX IS COMPUTED AT P130,000.
GROSS INCOME…………………………………800,000
LESS: P400,000 BRACKET 400,000……………P 30,000
EXCESS: 400,000 X 25%= 100,000
INCOME TAX………………………………………………………………. P130,000

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800,000/12 MONTHS=66,666.67 MONTHLY SALARY
130,000/12= 10,833.33 MONTHLY WITHHOLDING TAX

ASSUMING THE GROSS INCOME IS P600,000 - THE TAX DUE IS COMPUTED AT P600,000 -
P400,000 =P200,000 X 25% PLUS P30,000 EQUALS P80,000.
GROSS INCOME…………………………………600,000
LESS: P400,000 BRACKET 400,000……………P 30,000
EXCESS: 200,000 X 25%= 50,000
INCOME TAX……………………………………………………………….P 80,000
600,000/12= P 50,000 MONTHLY SALARY
INCOME TAX MONTHLY=80,000/12MOS.=P6,666.67

P250,000 AND BELOW……………………………………………… 0% / EXEMPT FROM WITHHOLDING TAX

P250,000 – P400,000 ………………………………………. 0 + 20% IN EXCESS OF P250,000

P400,000 – P 800,000……………………………………..P30,000 + 25% IN EXCESS OF P400,000

P800,000 - P2,000,000……………………………………P130,000 + 30% IN EXCESS OF P800,000

P2,000,000 – P8,000,000…………………………………P 490,000 + 32% IN EXCESS OF P2,000,000

P8,000,000 - ANY AMOUNT………………………….P2,410,000 + 35% IN EXCESS OF P8,000,000

ON THE FOURTH LEVEL, BETWEEN P800,000 T0 P2,000,000, THE FIRST P800,000 HAS A TAX OF P130,000 AND THE
EXCESS OF P1,200,000 (,2,000,000-800,000) SHALL BE MULTIPLIED BY 30% WHICH IS P P360,000. THE COMBINED
AMOUNT IS P490,000.

GROSS INCOME……………………………………………2.000.000
LESS: FORTH LEVEL……………………………………….800,000………………P 130,000
EXCESS…………………………………………………………1,200,000 X 30%= 360,000
TOTAL INCOME TAX………………………………………………………………………..490,000
ANOTHER EXAMPLE

P250,000 AND BELOW……………………………………………… 0% / EXEMPT

P250,000 – P400,000 ………………………………………. 0 + 20% IN EXCESS OF P250,000

P400,000 – P 800,000……………………………………..P30,000 + 25% IN EXCESS OF P400,000

P800,000 - P2,000,000……………………………………P130,000 + 30% IN EXCESS OF P800,000

P2,000,000 – P8,000,000…………………………………P 490,000 + 32% IN EXCESS OF P2,000,000

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P8,000,000 - ANY AMOUNT………………………….P2,410,000 + 35% IN EXCESS OF P8,000,000

COMPUTE INCOME TAX FOR THE YEAR:

1, P880,000 annual salary
INCOME TAX- TAX ON INCOME
TAX- IT MEANS INCOME TAX

GROSS INCOME (ANNUAL SALARY)…………………………P 880,000

LESS: 800,000 BRACKET…………………………………………. 800,000 130,000
EXCESS……………………………………………………………………… 80,000 X.30= 24,000
INCOME TAX…………………………………………………………………………………….. 154,000
880,000-800,000x30% + 130,000=154,000

2, P2,200,000 ANNUAL SALARY

GROSS INCOME (ANNUAL SALARY)…………………………P2,200,000
LESS: 2,000,000 BRACKET………………………………………….2,000,000 ………..490,000
EXCESS……………………………………………………………………… 200,000 X.32= 64,000
INCOEM TAX…………………………………………………………………………………….. 554,000

P250,000 AND BELOW……………………………………………… 0% / EXEMPT

P250,000 – P400,000 ………………………………………. 0 + 20% IN EXCESS OF P250,000

P400,000 – P 800,000……………………………………..P30,000 + 25% IN EXCESS OF P400,000

P800,000 - P2,000,000……………………………………P130,000 + 30% IN EXCESS OF P800,000

P2,000,000 – P8,000,000…………………………………P 490,000 + 32% IN EXCESS OF P2,000,000

P8,000,000 - ANY AMOUNT………………………….P2,410,000 + 35% IN EXCESS OF P8,000,000

ANOTHER PROBLEM
MR. A IS AN EMPLOYEE OF MAKATI CORPORATION, HE EARNS P53,000 A MONTH, HOW MUCH
HIS INCOME TAX FOR 2020?

Gross income (53,00x 12)………………………….636,000

Less: 400,000 bracket………………………………..400,000………………..30,000
Excess………………………………………………………..236,000 x .25%...... 59,000
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Income tax ……………………………………………………………………………….89,000

P250,000 AND BELOW……………………………………………… 0% / EXEMPT

P250,000 – P400,000 ………………………………………. 0 + 20% IN EXCESS OF P250,000

P400,000 – P 800,000……………………………………..P30,000 + 25% IN EXCESS OF P400,000

P800,000 - P2,000,000……………………………………P130,000 + 30% IN EXCESS OF P800,000

P2,000,000 – P8,000,000…………………………………P 490,000 + 32% IN EXCESS OF P2,000,000

P8,000,000 - ANY AMOUNT………………………….P2,410,000 + 35% IN EXCESS OF P8,000,000

PROBLEM: USING THE TAX TABLE, ASSUMING THE TAXPAYER PAID INCOME TAX OF P460,000 IN
2020, HOW MUCH IS GROSS INCOME?
Income tax paid………………………………………….460,000
Less:…………………………………………………………..130,000……………… 800,000
Excess………………………………………………………..330,000/30%........1,100,000
Gross income………………………………………………………………………….1,900,000

CHECKING
Gross income ……………………………………………..1,900.000
Less: 800,000 bracket…………………………………….800,000……………… P 130,000
Excess…………………………………………………………..1,100,000 x 30% 330,000
Income tax …………………………………………………………………………………… P 460,000

INCOME TAX PAID IS 18,000, HOW MUCH THE GROSS INCOME?

18,000/20%=90,000 +250,000 = P340,000

GROSS INCOME…………………………………………….. 340,000

LESS: 250,000 BRACKET 250,000…………………… 0
EXCESS…………………………………………………………….. 90,000 X 20% 18,000
INCOME TAX 18,000

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 GROSS INCOME TAXES ALREADY PAID

1. 32,000-30,000/.25+400,000= 408,000 1, P32,000

2. 226,000-130,000/.30+800,000= 1,120,000 2,) P226,000

3. 26,500/20%+250,000= 382,500 3,) P26,500

4. 700,000-490,000/.32+2,000,000=2,656,250 4,) P700,000

5. 1,900,000-490,000/.32+2,000,000= 5,) 1,900,000

6. 12,000,000-2,410,000/35%+P8,000,000= 35,400,000 6,) P12,000,000

7. 168,000-130,000/30% + 800,000= 7,) P168,000

P250,000 AND BELOW……………………………………………… 0% / EXEMPT

P250,000 – P400,000 ………………………………………. 0 + 20% IN EXCESS OF P250,000

P400,000 – P 800,000……………………………………..P30,000 + 25% IN EXCESS OF P400,000

P800,000 - P2,000,000……………………………………P130,000 + 30% IN EXCESS OF P800,000

P2,000,000 – P8,000,000…………………………………P 490,000 + 32% IN EXCESS OF P2,000,000

P8,000,000 - ANY AMOUNT………………………….P2,410,000 + 35% IN EXCESS OF P8,000,000

WITHHOLDING INCOME TAX

WHAT IS INCOME TAX- TAX ON INCOME

THE EMPLOYER IS MANDATED BY LAW TO DEDUCT WITHHOLDING TAX FROM THE SALARY OF
EMPLOYEE EVERY MONTH. THE WITHHELD TAX IS TO BE REMMITTED TO BIR’S DEPOSITORY
BANK ON THE FIRST 10 DAYS OF SUCCEEDING MONTH.

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1, THE EMPLOYEE RECEIVED P1,200,000 SALARY FOR 2020 WHICH IS NET OF 20%
WITHHOLDING TAX.
HOW MUCH THE INCOME ACTUALLY EARNED BY THE TAXPAYER?
MGKANO ANG TAX NA NAKALTAS - 340,000; MIRANDA, 240,000 CRUZ 240,000 AGUSTIN
240,000 ALEGRE 240,000; RABANAL, 240,000;
MIRANDA 960,000; AWANG, P1,500,000; AGUSTIN, 960,000; CRUZ, 1,440,000;

HOW MUCH THE EMPLOYEE ACTUALLY EARNED IN 2020?

GROSS INCOME (1,200,000/80%)……………………………………P1,500,000

INCOME TAX (P1,5M-800,000X.30+130,000)………………… P 340,000
LESS: WITHHOLDING TAX……………………………………………………..300,000 (1,500,000 -1,200,000)
INCOME TAX STILL DUE…………………………………………………….P 40,000

INCOME TAX DUE = THE WILHHOLDING TAX IS LOWER THAN INCOME TAX DUE
INCOME TAX REFUND=THE WITHHOLTAX IS BIGGER THAN INCOME TAX DUE

1,500,000/12= 125,000/ MONTH

THE GROSS INCOME IS P1,500,000, THE INCOME TAX DUE IS COMPUTED AT P1,500,000 -
P800,000 EQUALS P700,000 X 30% WHICH IS P210,000+P130,000. THE INCOME TAX DUE IS
P340,000.

ON THE FIFTH LEVEL, BETWEEN P2,000,000 TO P8,000,000. THE FIRST P2,000,000 HAS A TAX
OF P490,000 AND THE EXCESS OF P6,000,000 SHALL BE MULTIPLIED BY 32% WHICH IS P
1,920,000. THE COMBINED AMOUNT IS P2,410,000. ASSUMING THE GROSS INCOME OF AN
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EMPLOYEE IS P5,000,000. THE INCOME TAX DUE IS COMPUTED AT P5,000,000 - P2,000,000 X
32% + P490,000 EQUALS TO P P1,450,000 INCOME TAX.
ON THE SIXTH LEVEL, BETWEEN P8,000,000 TO HIGHER AMOUNT OF INCOME, TH FIRST
P8,000,000 IS SUBJECT TO P2,410,000 AND THE EXCESS FROM P8,000,000 SHALL BE
MULTIPLIED TO 35%. ASSUMING THE EMPLOYEE EARNED P20,000,000 THE INCOME TAX SHALL
BE COMPUTED AT 20,000,000-P8,000,000X35,000+2,410,000 EQUALS P6,610,000.

SECOND TAX TABLE

GRADUATED INCOME TAX TABLE UNDER THE TRAIN LAW
EFFECTIVE JANUARY 1, 2023 TO DECEMBER 31,

P250,000 AND BELOW……………………………………………… 0% / EXEMPT

P250,000 – P400,000 ………………………………………. 0 + 15% IN EXCESS OF P250,000
P400,000 – P 800,000……………………………………..P22,500 + 20% IN EXCESS OF P400,000
P800,000 - P2,000,000……………………………………P102,500 + 25% IN EXCESS OF P800,000
P2,000,000 – P8,000,000…………………………………P 402,500 + 30% IN EXCESS OF P2,000,000
P8,000,000 - ANY AMOUNT………………………….P2,202,500 + 35% IN EXCESS OF P8,000,000

EXAMPLE PROBLEM
EXAMPLE 1 - MARIA IS AN EMPLOYEE OF PHARMACEUTICAL COMPANY RECEIVING P35,000 A
MONTH. COMPUTE INCOME TAX OF MARIA IN A 2022?
GROSS INCOME/NET TAXABLE INCOME - (P35,000 X 12 MONTHS) = P 420,000
LOOKING IN THE TAX TABLE:
P420,000
- P400,000…………………………………………………P 30,000
P 20,000 X 25%........................................ 5,000
INCOME TAX DUE FOR THE YEAR P 35,000
OR
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420,000 – 400,000 X 25% + 30,000 = P 35,000

P35,000 INCOME TAX / 12 months = P2,916.66 =MONTHLY WITHHOLDING INCOME

AS LONG AS MARIA EARNED P35,000 A MONTH, HER EMPLOYER WOULD WIHHOLD P2,916.66
EVERY MONTH FROM HER SALARY. THE EMPLOYER IS CALLED WITHHOLDING AGENT OF BIR.
HE WAS DEPUTIZED BY BIR TO COLLECT AND WITHHOLD WITHHOLDING INCOME TAX FROM
THE SALARY OF EMPLOYEE. THE WITHHOLDING TAX WILL BE REMITTED TO BIR’S DEPOSITORY
BANK WITHIN 10 DAYS AFTER THE END OF THE EACH MONTH UNDER THE WITHHOLDING TAX
SYSTEM. NON-WITHHOLDING OF INCOME TAX ON THE PART OF EMPLOYER IS A CRIMINAL
OFFENSE PUNISHABLE BY LAW.

EXAMPLE 2
AN EMPLOYEE HAD MONTHLY SALARY AND WITHHOLDING TAXES DEDUCTION FOR THE
FOLLOWING MONTHS. ASSUMING THE EMPLOYEE WORK ONLY FIVE MONTH 2022:
GROSS INCOME WITHHOLDING INCOME TAX
JANUARY ………………………………………..P 50,000 P 6,500 (ASSUMPTION)
FEBRUARY ……………………………………….P 45,000 P 5,500
MARCH …………………………………………….P 60,000 P 8,000
APRIL ………………………………………………..P 50,000 P 6,000
MAY ………………………………………………… P 56,000 ?
ASSUMING MAY 31 HIS CONTRACT WILL END.
EXPLANATION OF THE PROBLEM
ASSUMING AN EMPLOYEE WAS EMPLOYED IN JANUARY OF THE YEAR EARNING P50,000, THE
EMPLOYER DEDUCTED P6,500 AS WITHHOLDING TAX. (ASSUMPTION) ON FEBRUARY, HE
EARNED P45,000 BECAUSE HE HAD ABSENCES, THE WITHHOLDING INCOME TAX WITHHELD
FROM HIS SALARY IS P5,500. ON MARCH, HE EARNED P60,000 BECAUSE OF OVERTIME, THE
WITHHOLDING TAX DEDUCTED FROM THE SALARY IS P8,000, ON APRIL AND MAY, HE EARNED
P50,000 AND P56,000 RESPECTIVELY WITH WITHHHOLDING TAX OF P6,000 ON APRIL. HIS
CONTRACT EXPIRED ON THE MAY 31, HOW MUCH INCOME TAX SHOULD THE EMPLOYER
WITHHELD OR REFUNDED THE EMPLOYEE ON MAY 31 OF THE YEAR?

AWANG P 31,600 REFUND; ALEGRE 31,600; MIRANDA 31,600; JABELO, 31,600;

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HOW MUCH THE INCOME TAX OF EMPLOYEE ON MAY 31?
GROSS INCOME/NTI…………………………………………………………………..P 261,000
TAX DUE - TAX TABLE
TAX TO BE PAID (P261,000 – 250,000 X 20% + P0).............................. 2,200
LESS: INCOME TAX WITHHELD……………………………………………………….. 33,800
INCOME TAX REFUND……………………………………………………………………P 31,600
THE TOTAL INCOME THE EMPLOYEE EARNED IS P261,000 AND THE TOTAL WITHHOLDING TAX
DEDUCTED FROM HIS SALARY IS P33,800. BASED ON THE COMPUTATION ABOVE THE
EMPLOYER SHOULD PAY P31,600 TO THE DISPLACED EMPLOYEE REPRESENTING INCOME TAX
REFUND. REFUND SHOULD BE MADE FROM THE EMPLOYER HIMSELF, BEACAUSE THEY ARE
THE ONE WHO COMPUTE AND WITHHELD THE TAX OF AN EMPLOYEE. REFUND SHALL ONLY
BE MADE IF THE WITHHOLDING TAX IS HIGHER THAN INCOME TAX DUE. REFUND OF THIS
KIND SHOULD NOT BE ASKED FROM THE BUREAU OF INTERNAL REVENUE.
EXAMPLE 3- COMPUTE INCME TAX DUE USING THE GRADUATED TAX TABLE
GROSS INCOME / NET TAXABLE INCOME INCOME TAX DUE OR PAYABLE
(ANNUALLY)
1. P155,000 EXEMPT

2, P 240,000 EXEMPT

3, P 400,000 400,000 - 250,000 X20%+0 = P30,000

400,000-400,000 X15%+30,000=P30,000

4, P 600,000 600,000 - 400,000 X 25% + P30,000 = P80,000

5, P1,000,000 1,000,000 - 800,000 X 30%+130,000=P190,000

6, P3,000,000 3,000,000-2,000,000 X32% + 490,000= 810,000

7, P15,000,000 15,000,000 -8,00,000 X.35+2,410,000 = P4,970,000

EXPLANATION OF PROBLEM 3
ON NUMBER 1, THE GIVEN GROSS INCOME OR TOTAL EARNINGS WERE P155,000 ANNUALLY.
IF YOU LOOK THE TAX TABLE THAT AMOUNT IS EXEMPT FROM INCOME TAX BECAUSE IT IS
SMALLER THAN THE P250,000 EXEMPTION GIVEN BY THE TRAIN LAW.
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ON NUMBER 2, SAME WITH NUMBER 1
ON NUMBER 3, THE GROSS INCOME OR TOTAL EARNINGS WERE P400,000, IF YOU LOOK THE
TAX TABLE THE INCOME TAX APPLICABLE FOTR P400,000 WAS P30,000. THE APPLICABLE
INCOME TAX IS P30,000.
ON NUMBER 4, THE GROSS INCOME OR TOTAL EARNINGS WERE P600,000. LOOK AT THE
TABLE THE NEAREST AMOUNT THAT CAN BE DEDUCTED FROM P600,000 IN THE INCOME
COLUMN WHICH IS P400,000. P600,000 MINUS P400,000 EQUALS P200,000 MULTIPLIED BY
25% PLUS P30,000 EQUAL P80,000. THE APPLICABLE INCOME TAX IS P80,000.
ON NUMBER 5, THE GROSS INCOME OR TOTAL EARNINGS WERE P1,000,000. LOOK AT THE
TABLE THE NEAREST AMOUNT THAT CAN BE DEDUCTED FROM P1,000,000 IN THE INCOME
COLUMN WHICH IS P800,000. P1,000,000 MINUS P800,000 EQUALS P200,000 MULTIPLIED BY
30% PLUS P130,000 EQUAL P190,000. THE APPLICABLE INCOME TAX IS P190,000.
ON NUMBER 6, THE GROSS INCOME OR TOTAL EARNINGS WERE P3,000,000. LOOK AT THE
TABLE THE NEAREST AMOUNT THAT CAN BE DEDUCTED FROM P3,000,000 IN THE INCOME
COLUMN WHICH IS P2,000,000. P3,000,000 MINUS P2,000,000 EQUALS P1,000,000
MULTIPLIED BY 32% PLUS P490,000 EQUAL P810,000. THE APPLICABLE INCOME TAX IS
P810,000.
ON NUMBER 7, THE GROSS INCOME OR TOTAL EARNINGS WERE P15,000,000. LOOK AT THE
TABLE THE NEAREST AMOUNT THAT CAN BE DEDUCTED FROM P15,000,000 IN THE INCOME
COLUMN WHICH IS P8,000,000. P15,000,000 MINUS P8,000,000 EQUALS P7,000,000
MULTIPLIED BY 35% PLUS P2,410,000 EQUAL P810,000. THE APPLICABLE INCOME TAX IS
P4.970,000.
EXAMPLE 4- COMPUTE GROSS INCOME OR NET TAXABLE FROM THE FOLLOWING INCOME
TAX DUES. THIS KIND OF PROBLEM WILL ANSWER THE QUESTION IF I PAY THIS AMOUNT OG
INCOME TAX, HOW MUCH MY TOTAL EARNINGS?
GROSS INCOME/NET TAXABLE INCOME INCOME TAX PAYMENTS
P290,000-130,000/30%+P800,000=P1,333,333.33 1, P290,000
P1,333,333.33-P800,000X30%+P130,000=P290,000

P580,000-P490,000/32%+P2,000,000 = P2,281,250 2, P580,000

P18,000/20%+P250,000=P340,000 3, P 18,000

P4,000,000-P2,410,000/35%+P8,000,000= 4, P4,000,000

P65,500-P30,000=P35,500/25%+ P400000=P542,000 5, P65,500

EXPLANATION ON THE PROBLEM

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THE GIVEN INCOME TAX PAYMENT ON NO. 1 WAS P290,000, FROM THIS AMOUNT YOU WILL
COMPUTE THE TOTAL EARNINGS OF THE TAXPAYER WHICH IS CALLED GROSS INCOME OR NET
TAXABLE INCOME. THIS PROCESS IS TOTALLY THE INVERSE OF USING THE TAX TABLE. LOOK IN
THE TAX TABLE IN THE COLUMN TAX THE NEAREST AMOUNT THAT CAN BE DEDUCTED FROM
P290,000. THE NEAREST AMOUNT IS P130,000. SO, P290,000 MINUS P130,000 EQUALS
P160,000 DIVIDED BY 30%. (THE 30% IS THE TAX RATE APPLICABLE FOR P130,000) EQUALS
YOU P533,333.33 PLUS P800,000 (THE APPLICABLE AMOUNT FOR P130,000). TOTAL
EARNINGS OR GROSS INCOME WERE P1,333,333.33.

ON NO. 2, THE GIVEN TAX PAYMENT IS P580,000. LOOK IN THE TABLE THE NEAREST AMOUNT
THAT CAN BE DEDUCTED FROM P580,000 UNDER THE TAX COLUMN. THE AMOUNT IS
P490,000. P580,000 MINUS P490,000 EQUALS P90,000 DIVIDED BY 32% EQUAL P281,250 PLUS
P2,000,000 EQUALS P2,281,250. TOTAL EARNINGS OR GROSS INCOME WERE P2,281,250.
ON NO. 3, THE GIVEN TAX PAYMENT WAS P18,000. LOOK AT THE TABLE AND FIND THE
NEAREST AMOUNT THAT CAN BE DEDUCTED FROM P18,000 IN THE TAX COLUMN. THERE IS
NO AMOUNT IN THE COLUMN BECAUSE THE LOWER AMOUNT IS P30,000. IT IS NOT POSSIBLE
TO DEDUCT P30,000 FROM P18,000 IN THIS RESPECT. DIVIDE P18,000 BY 20% AND ADD
P250,000 TO GET THE TOTAL EARNINGS OF P340,000.
ON NO. 4, THE GIVEN TAX PAYMENT WAS P4,000,000. LOOK AT THE TABLE AND FIND THE
NEAREST AMOUNT THAT CAN BE DEDUCTED FROM P4,000,000 IN THE TAX COLUMN. THE
NEAREST AMOUNT WAS P2,410,000. SO, 4,000,000 MINUS P2,410,000 EQUALS P1,590,000
DIVIDED BY 35% EQUALS P4,542,857.10 PLUS P8,000,000, THE TOTAL EARNING OR GROSS
INCOME WAS P12,542,857.10.
ON NO. 5, THE GIVEN TAX PAYMENT WAS P65,500 LOOK AT THE TABLE AND FIND THE
NEAREST AMOUNT THAT CAN BE DEDUCTED FROM P65,500 IN THE TAX COLUMN. THE
NEAREST AMOUNT WAS P30,000. SO, P65,000 MINUS P30,000 EQUALS P35,500 DIVIDED BY
25% EQUALS P142,000 PLUS P400,000, THE TOTAL EARNING OR GROSS INCOME WAS
P542,000.
EXAMPLE PROBLEM ON WITHHOLDING INCOME TAX
1, THE TAXPAYER PAID P90,000 IN INCOME TAX IN 2022, HOW MUCH IS HIS GROSS INCOME
OR NET TAXABLE INCOME?
ANSWER: 90,000-30,000=60,000/.25%+250,000 = P640,000
PROBLEM 2 PROBLEM ON WITHHOLDING TAXES
THE TAXPAYER RECIVEID A TOTAL ANNUAL SALARY OF P1,200,000 WHICH IS NET OF 20%
WITHHOLDING TAX. HOW MUCH THE INCOME TAX STILL DUE OR INCOME TAX REFUND IN
2022?

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GROSS COMPENSATION INCOME (1,200,000/.80)………………………………P 1,500,00.
INCOME TAX DUE (1,500,000 -800,000 X.30+130,000 ) ………………………P 340,000
LESS: WITHHOLDING TAX 1,500,000 X 20%) …………………………………… P 300,000
INCOME TAX STILL DUE …………………………………………………………………… P 40,000
EXPLANATION OF PROBLEM 2 - THE EMPLOYEE RECEIVED P1,200,000 ANNUAL SALARY AFTER
DEDUCTING 20% WITHHOLDING TAX. TO COMPUTE THE 100% GROSS INCOME, THE
P1,200,000 SHOULD BE DIVIDED BY 80%. THE 80% IS DERIVED FROM 100% - 20%
WITTHOLDING TAX. THE AMOUNT OF GROSS INCOME IS P1,500,000 AND THE INCOME TAX
APPLICABLE FOR P1,500,000 IS P P340,000. THE EMPLOYEE SHOULD STILL PAY P40,000 TO
AFTER DEDUCTING THE WITHHOLDING TAX. INCOME TAX STILL DUE HAPPENS WHEN
INCOME TAX DUE IS BIGGER THAN WITHHELD TAX, AN INVERSE OF INCOME TAX REFUND.

PROBLEM 3 PROBLEM ON WITHHOLDING TAXES

THE TAXPAYER EMPLOYEE RECIVEID A TOTAL ANNUAL SALARY OF P1,600,000 WHICH IS NET
OF 30% WITHHOLDING TAX. HOW MUCH THE INCOME TAX STILL DUE OR INCOME TAX
REFUND?
GROSS COMPENSATION INCOME (1,600,000/70%)……………………………….P 2,285,714.30
INCOME TAX DUE (2,285,714-2,000,000X.32+490,000) ………………………P 581,428.00
LESS: WITHHOLDING TAX (2,285,714.3 X 30%) ……………………………………P 685,714.30
INCOME TAX REFUND…………………………………………………………………………P 104,286.30

EXPLANATION OF PROBLEM 3.
THE TAXPAYER EMPLOYEE RECEIVED HER SALARY AMOUNTING TO P1,600,000 WHICH IS NET
OF 30% WITHHOLDING INCOME TAX. IT MEANS THAT ONLY 70% OF HER INCOME WAS
DIRECTLY PAID TO HER BECAUSE THE REMAINING 30% WAS WITHHELD BY THE EMPLOYER AS
WITHHOLDING INCOME TAX. AT THE END OF THE YEAR USUALLY DECEMBER 31, THE LAST
DAY FOR THE YEAR TO COMPUTE THE INCOME TAX BASED ON THE ACTUAL EARNINGS OF THE
EMPLOYEE SO THAT PROPER AND CORRECT AMOUNT OF TAX WILL BE WITHHELD FROM HER.
IN THE PROBLEM, ONLY P1,600,000 WAS PAID TO BUT THE ACTUAL EARNINGS WERE
P2,285,714.30. THE DIFFERENCE WHICH IS P685,714.30 IS THE WITHHOLDING INCOME TAX.
BASED ON THE TAX TABLE, THE INCOME TAX DUE WAS ONLY P581,428 WHICH IS LOWER
THAN WITHHOLDING TAX THE REASON WHY THERE IS A REFUND OF P104,286.30

PROBLEM 4 PROBLEM ON WITHHOLDING TAXES

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THE TAXPAYER EMPLOYEE RECEIVED A TOTAL ANNUAL SALARY OF P900,000 WHICH IS NET OF
P110,000 WITHHOLDING TAX FROM BB COMPANY. HOW MUCH THE INCOME TAX STILL DUE
OR INCOME TAX REFUND?

GROSS COMPENSATION INCOME (800,000+120,000)……………………………….P 920,000

INCOME TAX DUE (920,000-800,000 X 25%+102,500)…………………………..P 132,500
LESS: WITHHOLDING INCOM TAX ……………………………………………………….P 120,000
INCOME TAX STILL DUE…………………………………………………………………………P 12,500

EXPLANATION OF THE PROBLEM - FIRST OF ALL TAKE NOTE OF THE YEAR OF THE PROBLEM,
IT IS 2023, IT MEANS YOU WILL BE USING THE 2 ND TAX TABLE OF THE TRAIN LAW WHICH
BECOMES EFFECTIVE IN JANUARY 1, 2023. THE TAXPAYER EMPLOYEE RECEIVED ANNUAL
SALARY AMOUNTING TO P800,000 WHICH IS NET OF P120,000 WITHHOLDING TAX. TOTAL
EARNINGS FOR THE YEAR WERE P920,000 BY ADDING THE TWO, BASED ON THE 2 ND TAX
TABLE THE TAX DUE FOR P920,000 IS P132,500. THE INCOME TAX STILL IS AFTER DEDUCTING
120,000 FROM P132,500 IS P12,500 BECAUSE THE WITHHOLDING TAX IS SMALLER THAN
INCOME TAX DUE.

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