FAQs | Evangeline A. Santos, CPA, CMA

What if the receives service charge which is not included in the enumerated exemptions such as holiday pay, overtime pay, etc., will he still be exempt from income tax? If not, how will his income tax be computed?

The MWE will still be exempt from income tax on his SMW including the other income earned specifically enumerated as exempt under the law. However, income other than those in the enumeration shall already be taxable. The taxable income shall be computed by deducting the non-taxable/exempt portion and other deductions from the gross compensation income….

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Is the MWE exempt from income tax?

The MWE is exempt from income tax on his basic SMW, overtime (OT) pay, holiday pay, night shift differential (NTD) pay and hazard pay. However, income other than those mentioned are subject to income tax.

How do we determine if a government employee IS considered a Minimum Wage Earner (MWE)?

The government entity/employer must be aware of the Statutory Minimum Wage (SMW) prescribed for a particular geographical region by the National Wages and productivity Commission (NWPC) of the Department of Labor and Employment (DOLE). The copy of the wage matrix they provide Bureau is circularized every time there are changes in the SMW. If the…

What would be the treatment of the commission given to an employee in addition to the regular compensation received from the same employer (income payor/withholding agent)? Is the remittance of the withholding tax on commission separate from the tax withheld on compensation?

The commission received from the same employer shall be considered as supplementary income. It shall be added to the regular compensation subject to income tax and consequently to withholding tax using the withholding tax table on compensation, The tax withheld shall be filed month and remitted using BIR Form No. 1601-C.

What would be the treatment of the additional income as a result of the benefits provided under the Attrition Law wherein employees who are performing well will receive rewards?

The said additional income (benefits, whether in the form of cash or reward in kind, shall form part of the compensation income subject to withholding tax on compensation, The fair market value of the reward in kind shall be included in the taxable compensation.

What is the treatment for the Premium on Health Card paid by the employer for the “rank and file’ employees, as well as for those employees holding “managerial or supervisory function?

Premium on Health Card paid by the employer for all employees, whether rank and file or managerial/supervisory, under a group insurance shall be included as part of other benefits of these employees which are subject 10 the P90,000 threshold. However, individual premiums (not part of group insurance) paid for selected employees holding managerial or supervisory…

Are incentives given to employees also taxable? If yes, how much is taxable?

In general, any incentives given to employees shall form part of the compensation subject to income tax. unless specifically exempted under a special law or incentives are in the nature of the previously enumerated “de minimis” benefits.