[Ask The Tax Whiz] How much income tax do I have to pay? (2024)

Mar 17, 2023 3:00 PM PHT

Mon Abrea

The Philippine Tax Whiz helps you compute your income tax

1. I’m a freelancer with an annual income of less than P3,000,000. How can I compute my income tax? And can I avail the 8% income tax option?

If you avail the 8% income tax rate, your tax is computed based on the gross income in excess of P250,000. To do so, however, you need to signify your intention to elect the 8% tax rate on your income tax return for the first quarter of the taxable year. If you do so, the election of the 8% income tax rate is irrevocable and no amendment of the option shall be made for the said taxable year.

2. I’m an employee receiving a basic salary of less than P250,000 per year and receiving bonuses. Will I be subject to tax?

If your basic salary is less than P250,000 per year, then you are exempt from income tax. But since you are receiving bonuses, you need to keep in mind that there is a P90,000 threshold for bonuses. This means that if you receive more than P90,000 in bonuses, the excess will be subject to tax. Keep in mind also that your holiday pay, overtime pay, night shift differential pay, and hazard pay are all exempt from income tax, so you do not have to include them in your computation.

3. In relation to income tax on compensation, are de minimis benefits also covered with the P90,000 threshold?

No. The P90,000 threshold is only applicable to 13th month pay and other benefits. De minimis benefits are not included. These are the benefits that are considered de minimis benefits:

1. Monetized unused vacation leave credits not exceeding 10 days during the year
2. Monetized vacation and sick leave credits paid to government officials and employees
3. Medical cash allowance to dependents of employees, not exceeding P1,500 per semester of P250 per month
4. Rice subsidy of P2,000 or one sack of 50-kilogram rice per month amounting to not more than P2,000
5. Uniform and clothing allowance not exceeding P6,000 per annum
6. Actual medical assistance, e.g. medical allowance to cover medical and healthcare needs, annual medical/executive check-up, maternity assistance, and routine consultations, not exceeding P10,000 per annum
7. Laundry allowance not exceeding P300 per month
8. Employees achievement awards in the form of a tangible personal property other than cash or gift certificate, with an annual monetary value not exceeding P10,000
9. Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per annum
10. Daily meal allowance for overtime work not exceeding 25% of the basic minimum wage
11. Benefits received by an employee by virtue of a collective bargaining agreement and productivity incentive schemes provided that the total annual monetary value received from both CBA and productivity incentive schemes combined do not exceed ten thousand pesos P10,000 per taxable year

4. What is the treatment for the premium on health card paid by the employer for the rank and file and managerial or supervisory function?

Premium on health card paid by the employer for all employees, whether rank and file and managerial or supervisory, under a group insurance shall be tax exempt as clarified in RMC No. 96-2018, which was previously included as other benefits subject to the P90,000 threshold in RMC No. 50-2018. However, individual premiums paid for managerial or supervisory functions are still considered “fringe benefits” subject to fringe benefits tax.

5. What is minimum corporate income tax? What is the tax rate imposed for the MCIT?

The MCIT is a tax imposed on domestic corporations and resident foreign corporations beginning the 4th taxable year in which the corporation commenced its business operations. For the period July 1, 2020 to June 30, 2023, the MCIT rate is 1% of the gross income of a corporation. After that period, the MCIT rate would return to its usual 2%.

You have to pay MCIT only if your tax liability under the MCIT is lower than your tax liability under the regular corporate income tax rates. For example, when you incur significant losses such that your taxable income is zero, you will still have to pay the MCIT (which is 1%/2% of your gross income).If you have other questions about your income tax return, you may download TaxWhizPH App for FREE via Play Store or App Store. – Rappler.com