How to compute withholding taxes on compensation under the TRAIN Law

The TRAIN Law provides new personal income tax rates but this table is useful in computing annual income tax. In order to determine the daily/weekly/semi-monthly/monthly withholding taxes on compensation, the BIR has issued RMC 105-2017. Following is an example on how to compute monthly withholding tax:

1

Sample Monthly rate = Php 40,000

Step 1: Compensation Level (CL) – The Php 40,000 monthly salary will fall under column 3 because it is higher than Php 33,333 but lower than Php 66,667. Hence, we will use column 3 in computing for the withholding taxes.

Step 2: Prescribed Minimum Withholding Tax – The fixed amount under column 3 is Php 2,500. Also, the “+ 25% over CL” means that the excess of Php 40,000 over Php 33,333 will be taxed at 25% which is equal to Php 1,666.75.

Step 3: Total Withholding Tax – Sum up Php 2,500 and Php 1,666.75 and you will get Php 4,166.75.

That’s all! Easy, right?

– Mag & Paul, Your Partners in Decision-Making

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