Revised withholding tax table for compensation

This Tax Alert is issued to inform all employers of the new withholding tax rates on compensation of employees effective January 1, 2018.

The Bureau of Internal Revenue (BIR) has circularized the Revised Withholding Tax Table which should be used in computing the tax to be withheld on every payment of compensation to employees. The Table is effective from January 1, 2018 to December 31, 2022. Under the TRAIN law, there will be revised rates of the individual income tax effective on January 1, 2023.

The revised withholding table takes into consideration the new individual income tax rates in the TRAIN law as well as the repeal of the personal and additional exemptions for purposes of computing the individual income tax.

In the revised withholding tax table, the employees receiving salaries not exceeding the following amounts shall be exempt from withholding tax:

a. P685 daily wage

b. P4,808 weekly wage

c. P10,417 semi-monthly wage

d. P20,833 monthly wage

However, since the withholding tax table is only for purposes of estimating the tax due, it is possible that some of these employees may still be liable to income tax if they receive additional taxable compensation or bonuses during the year. The tax-exempt threshold for 13th month pay and bonuses is now at P90,000. On the other hand, the tax-exempt bracket in the schedule of income tax rates is P250,000.