How To Compute Withholding Tax On Compensation

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Legend:
Z-Zero exemption
S-Single
ME-Married Employee
1;2;3;4- Number of quali ed dependent children
S/ME = P50,000 Each Working employee
Quali ed Dependent Child = P25,000 each but not exceeding four (4) children
USE TABLE A FOR SINGLE/MARRIED EMPLOYEES WITH NO QUALIFIED

DEPENDENT
1. Married Employee (Husband or Wife) whose spouse is unemployed.
2. Married Employee (Husband or Wife) whose spouse is non-resident citizen receiving
income from foreign sources.
3. Married Employee (Husband or Wife) whose spouse is engaged in business.
4. Single with dependent father/mother/brother/sister/senior citizen.
5. Single
6. Zero Exemption for Employees with multiple employers for the 2nd,3rd…employers
(main employer claims personal & additional exemption)
7. Zero Exemption for those who failed to le Application for Registration
X by DNSUnlocker USE TABLE B FOR THE FOLLOWING

SINGLE/MARRIED EMPLOYEES WITH
QUALIFIED DEPENDENT CHILDREN
1. Employed husband and husband claims
exemptions of children
2. Employed wife whose husband is also
employed or engaged in business; husband
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3. Single with quali ed dependent children.
If the compensation is paid other than daily,

weekly, semi-monthly or monthly, the tax to be
withheld shall be computed as follows.
a. Annually – use the annualized computation

(see no. 3 below).
b. Quarterly and semi-annually – divide the

compensation by three (3) or six (6)
respectively, to determine the average monthly compensation. Use the monthly withholding
tax table to compute the tax, and the tax so computed shall be multiplied by three (3) or six
(6) accordingly.
2. Cumulative average method. This method is used if (a) in respect of a particular

employee, the regular compensation is exempt from withholding tax because the amount
thereof is below the compensation level, but supplementary compensation is paid during the
calendar year or the supplementary compensation is equal to or more than the regular
compensation to be paid; or (b) the employee was newly hired and had a previous
employer/s within the calendar year, other than the present employer doing this cumulative
computation.
3. Annualized withholding tax method. This method is used (a) when the employer-
employee relationship is terminated before the end of the calendar year; and (b) when
computing for the year-end adjustment (the employer shall determine the amount to be
withheld from the compensation on the last month of employment or in December of the
current calendar year).
Steps in computing amount of tax to be withheld
Step1. Determine the total monetary and non-monetary compensation paid to an employee
for the payroll period, segregating gross bene ts which include 13th month pay, productivity
incentives, Christmas bonus, other bene ts, received by the employee per payroll period,
and employees’ contribution (employees’ contribution only and not the employers’
contribution) to SSS, GSIS, HDMF, PHIC, and union dues. Gross bene ts which are received
by of cials and employees of both public and private entities in the amount of P30,000 or
less shall be exempted from income and withholding taxes.
You may read our article about How to compute 13th Month Pay in the Philippines.
Step2. Segregate the taxable from the non-taxable compensation income paid to the
employee for the payroll period. The taxable income refers to all remuneration paid to an
employee not otherwise exempted by law from income tax and consequently from
withholding tax. The non-taxable income are those which are speci cally exempted from
income tax by the Code or by other special laws as listed in Sec.2.78.1(B) hereof (e.g. bene ts
not exceeding P30,000, non-taxable retirement bene ts and separation pay).
You may read our article titled “How to Compute Separation Pay in the Philippines”.
Step3. Segregate the taxable compensation income as determined in Step 2 into regular
taxable compensation income and supplementary compensation income. Regular
compensation includes basic salary, xed allowances for representation, transportation and
other allowances paid to an employee per payroll period. Supplementary compensation
includes payments to an employee in addition to the regular compensation such as
commission, overtime pay, taxable retirement pay, taxable bonus and other taxable bene t,
with or without regard to a payroll period.
You may read our article on “How to Compute Overtime Pay in the Philippines”.
Representation and Transportation Allowance (RATA) granted to public of cers and

employees under the General Appropriations Act and the Personnel Economic Relief
Allowance (PERA) which essentially constitute reimbursement for expenses incurred in the
performance of government personnel’s of cial duties shall not be subject to income tax and
consequently to withholding tax.
Step 4. Use the appropriate tables mentioned under Section 2.79 (B)(1) for the payroll
period: monthly, semi-monthly, weekly or daily, as the case may be.
Step 5. Fix the compensation level as follows:
(a) Determine the line (horizontal) corresponding to the status and number of quali ed
dependent children using the appropriate symbol for the taxpayer’s status.
(b) Determine the column to be used by taking into account only the total amount of taxable
regular compensation income. The compensation level is the amount indicated in the line
and column to which the regular compensation income is equal to or in excess, but not to
exceed the amount in the next column of the same line.
Step 6. Compute the withholding tax due by adding the tax predetermined in the
compensation level indicated at the top of the column, to the tax on the excess of the total
regular and supplementary compensation over the compensation level, which is computed
by multiplying the excess by the rate also indicated at the top of the same
column/compensation level.
Sample Computations Using the Withholding Tax Tables
The following are sample computations of Withholding tax on compensation using the
withholding tax tables:
Example 1: Single with no dependent receiving monthly compensation
Juan Santos, single with no dependent, receives P18,000 (net of SSS/GSIS,PHIC,HDMF

employee share only) as monthly regular compensation and P 7,000 as supplementary
compensation for January 2011 or a total of P25,000. How much is the withholding tax for
January 2011 for Juan?
Computation:
By using the monthly withholding tax table, the withholding tax for January 2011 is
computed by referring to Table A line 2 S (single) of column 6 ( x compensation level taking
into account only the regular compensation income of P18,000 which shows a tax of P1,875
on P15,833 plus 25% of the excess of P 2,167 (P18,000-15,833) plus P7,000 supplementary
compensation.
Regular compensation: P 18,000

Less: compensation level
(line A-2 column 6) 15,833
Excess P 2,167
Add: Supplementary compensation 7,000
Total P 9,167
Tax on P15,833 P 1,875.00

Tax on excess (P9,167 x 25%) 2,291.75
Withholding tax for January 2011 P 4,166.75
Example 2: Married with quali ed dependent children receiving semi-monthly

compensation
Jose Cruz, married with three (4) quali ed dependent children receives P14,000 (net of
SSS/GSIS,PHIC,HDMF employee share only) as regular semi-monthly compensation. His
wife is also employed but he did not waive his right in favor of the wife to claim for the
additional exemptions.
Computation: Using the semi-monthly withholding tax tables, the withholding tax due is
computed by referring to Table B line 4 ME4 of column 6 which shows a tax of P937.5 on
P12,083 plus 25% of the excess (P 14,000 – 12,083 = P1,917).
Total taxable compensation P 14,000

Less: compensation level
(line B-4 Column 6) 12,083
Excess P 1,917
Tax on P12,083 P 937.50
Tax on excess (P1,917 x 25%) 479.25

Semi-monthly withholding tax P1,416.75
For more samples of computations, such as computations using the cumulative average
method, and annualized withholding tax method for computing year-end adjustments and
when the employer-employee relationship is terminated before the end of the calendar year,
please read the BIR issued Revenue Regulations No. 10-2008, which you can download the
full text at the following links:
Revenue Regulations No. 10-2008 PDF le from BIR Website or

Revenue Regulations No. 10-2008 PDF le from our website, in case the BIR link won’t work
You can also view/download the following:

How To Compute Withholding Tax On Compensation

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USE TABLE A FOR SINGLE/MARRIED EMPLOYEES WITH NO QUALIFIED

X by DNSUnlocker USE TABLE B FOR THE FOLLOWING

If the compensation is paid other than daily,

a. Annually – use the annualized computation

b. Quarterly and semi-annually – divide the

2. Cumulative average method. This method is used if (a) in respect of a particular

Steps in computing amount of tax to be withheld

Representation and Transportation Allowance (RATA) granted to public of cers and

Step 5. Fix the compensation level as follows:

Sample Computations Using the Withholding Tax Tables

Juan Santos, single with no dependent, receives P18,000 (net of SSS/GSIS,PHIC,HDMF

Regular compensation: P 18,000

Tax on P15,833 P 1,875.00

Example 2: Married with quali ed dependent children receiving semi-monthly

Total taxable compensation P 14,000

Tax on excess (P1,917 x 25%) 479.25

Revenue Regulations No. 10-2008 PDF le from BIR Website or

You can also view/download the following:

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