How To Calculate Withholding Tax Philippines

Accurately compute your withholding tax based on the latest BIR regulations (2024)

Comprehensive Guide: How to Calculate Withholding Tax in the Philippines (2024)

The Philippine withholding tax system is a pay-as-you-earn (PAYE) scheme where employers deduct taxes from employees’ salaries before payment. This guide explains the current withholding tax tables, exemptions, and calculation methods based on the Bureau of Internal Revenue (BIR) Revenue Regulations No. 11-2018 and subsequent updates.

1. Understanding Withholding Tax Basics

Withholding tax on compensation is the amount withheld from an employee’s salary and remitted to the BIR. The system uses progressive tax rates ranging from 0% to 35%, depending on the taxable income bracket.

Key Components:

• Taxable Income: Gross income minus mandatory deductions (SSS, PhilHealth, Pag-IBIG) and personal exemptions
• Tax Brackets: Progressive rates from 0% to 35% based on income levels
• Payment Frequency: Affects how tax is computed per pay period
• Exemptions: ₱50,000 personal exemption + ₱25,000 per dependent (max 4 dependents)

2. 2024 Withholding Tax Tables

The BIR provides different tables based on payment frequency. Below are the annualized tables:

Compensation Level (₱)	Fixed Tax (₱)	Rate on Excess (%)
Not over ₱250,000	₱0.00	0%
Over ₱250,000 but not over ₱400,000	₱0.00	15%
Over ₱400,000 but not over ₱800,000	₱22,500	20%
Over ₱800,000 but not over ₱2,000,000	₱102,500	25%
Over ₱2,000,000 but not over ₱8,000,000	₱402,500	30%
Over ₱8,000,000	₱2,202,500	35%

3. Step-by-Step Calculation Process

1. Determine Gross Income: Calculate total annual compensation including basic salary, bonuses, and allowances
2. Subtract Non-Taxable Benefits: Deduct de minimis benefits (₱90,000 annual limit) and other exempt income
3. Apply Mandatory Deductions: Subtract SSS (₱4,770 max), PhilHealth (₱3,600 max), and Pag-IBIG (₱2,400 max) contributions
4. Apply Personal Exemptions: Deduct ₱50,000 personal exemption + ₱25,000 per qualified dependent (max 4)
5. Compute Taxable Income: Result from step 4 is your taxable income
6. Apply Tax Table: Use the appropriate tax table based on payment frequency
7. Calculate Withholding Tax: Fixed tax + (rate × excess over bracket)

4. Special Cases and Exemptions

Minimum Wage Earners (MWE): Employees earning the statutory minimum wage (₱570-₱610/day depending on region) are exempt from withholding tax on their basic pay, but taxes apply to income exceeding the minimum wage.

13th Month Pay: The first ₱90,000 of 13th month pay and other benefits is tax-exempt. Any amount above ₱90,000 is subject to withholding tax.

De Minimis Benefits: The following are tax-exempt up to annual limits:

• ₱90,000 for 13th month pay and other benefits
• ₱30,000 for productivity incentives
• ₱10,000 for medical cash allowance
• ₱3,000 for rice subsidy
• ₱1,500 for uniforms/clothing allowance

5. Common Calculation Examples

Example 1: Regular Employee (Annual Income ₱500,000)

Calculation:

1. Gross Income: ₱500,000
2. Less: SSS/PhilHealth/Pag-IBIG (₱10,770) = ₱489,230
3. Less: Personal Exemption (₱50,000) = ₱439,230
4. Taxable Income: ₱439,230
5. Tax Calculation:
   • First ₱250,000: ₱0
   • Next ₱150,000 (₱400,000-₱250,000): ₱22,500
   • Remaining ₱39,230: ₱7,846 (20%)
   • Total Tax: ₱30,346

Example 2: Minimum Wage Earner (Monthly Income ₱15,000)

Calculation:

1. Basic Pay (₱15,000) is at minimum wage level → Tax Exempt
2. If employee receives ₱2,000 overtime:
   • Taxable Income: ₱2,000
   • Monthly Tax: ₱300 (15% of ₱2,000)

6. Comparison: Old vs New Tax System (TRAIN Law)

The Tax Reform for Acceleration and Inclusion (TRAIN) Law implemented in 2018 significantly changed the tax structure:

Feature	Pre-TRAIN (Before 2018)	Post-TRAIN (2018-Present)
Tax-Free Threshold	₱10,000 annual	₱250,000 annual
Top Tax Rate	32%	35%
Personal Exemption	₱50,000 + ₱25,000/dependent	₱50,000 + ₱25,000/dependent (but phased out for high earners)
13th Month Pay Tax	Fully taxable if over ₱30,000	First ₱90,000 tax-exempt
De Minimis Benefits	₱30,000 annual limit	₱90,000 annual limit

7. Filing and Payment Procedures

Employers must:

1. Register with the BIR and secure a TIN for the business
2. Register employees and secure their TINs
3. Deduct withholding tax from compensation using the correct tables
4. Remit taxes to the BIR using BIR Form 1601-C (monthly) and BIR Form 1604-CF (annual)
5. Issue BIR Form 2316 (Certificate of Compensation Payment/Tax Withheld) to employees by January 31 of the following year
6. File annual information returns using BIR Form 1604-CF by March 1

Employees should verify their Form 2316 and use it when filing their annual income tax return (BIR Form 1700 for purely compensation income).

8. Common Mistakes to Avoid

• Using wrong tax tables: Always use the tables corresponding to the payment frequency
• Incorrect exemption claims: Verify dependent qualifications and exemption limits
• Missing deadlines: Monthly remittance (10th of following month) and annual filing (March 1)
• Improper documentation: Maintain complete records of computations and remittances
• Ignoring minimum wage rules: Minimum wage earners have special tax treatment
• Not updating for inflation: Brackets and exemptions may change annually

9. Digital Tools and Resources

The BIR provides several online tools to assist with withholding tax calculations:

• BIR eServices Portal – For online filing and payment
• BIR Forms Download – All official tax forms
• DOLE Website – For minimum wage rates by region

For complex situations, consult a certified public accountant or tax advisor. The BIR also offers free tax assistance through their Revenue District Offices (RDOs) nationwide.

Important Disclaimer: This calculator and guide provide estimates based on current tax laws. For official computations, always refer to the latest BIR regulations or consult a tax professional. Tax laws may change, and this information may become outdated. The authors assume no responsibility for errors or omissions in this content.