§ The new law added the terms “statutory minimum wage” and “minimum wage earner” in Section 22 of the Tax Code of 1997, as amended.
§ The term statutory minimum wage shall refer to the rate fixed by the Regional Tripartite Wage and Productivity Board, as defined by the Bureau of labor and Employment Statistics (BLES) of the Department of Labor and Employment (DOLE). While the term minimum wage earner shall refer to a worker in the private sector paid the statutory minimum wage, or to an employee in the public sector with compensation income of not more than the statutory minimum wage in the non-agricultural sector where he/she is assigned.
§ Section 24 provides that minimum wage earners as defined in Section 22(HH) shall be exempt from the payment of income tax on their taxable income. Moreover, the holiday pay, overtime, night shift differential pay and hazard pay received by such minimum wage earners shall likewise be exempt from income tax.
§ A minimum wage earner or an individual who is exempt from income tax pursuant to the provisions of the 1997 Tax Code and other laws, general or special, shall not be required to file an income tax return.
§ The new law removes in Section 51, the provision stating that “individuals whose pure compensation income derived from sources within the Philippines exceeds Sixty thousand pesos (P60,000) shall file an
income tax return”.
§ Employers are also mandated not to deduct and withhold tax on wages on the income of a minimum wage earner and removes the provision in Section 79 providing “that no withholding of a tax shall be required where the total compensation income of an individual does not exceed the statutory minimum wage, or Five thousand pesos (P5,000.00) per month, whichever is higher.”
§ The new law also amended the provision on Optional Standard Deduction in Section 34, increasing the rate to 40% of gross sales or receipts for individuals subject to tax under Section 24, other than a nonresident alien. The Optional Standard Deduction is not available to taxpayers earning compensation income arising from personal services rendered under an employee-employee relationship.
§ The new law further accorded the option to corporations to elect a standard deduction in an amount not exceeding forty percent (40%) of its gross income as defined in Section 32.
§ Unless the taxpayer signifies in his return his intention to elect the optional standard deduction, he shall be considered as having availed of the itemized deductions allowed in Section 34. Such election when made in the return shall be irrevocable for the taxable year for which the return is made.
§ An individual who is entitled to and claimed for the optional standard deduction shall not be required to submit with his tax return such financial statements otherwise required under the Tax Code. However, said individual shall keep such records pertaining to his gross sales or gross receipts.
§ Corporations availing of the optional standard deduction are still required to submit with its tax return the financial statements required under the Tax Code. The said corporation shall also keep such records
pertaining to his gross income as defined in Section 32 of the Tax Code during the taxable year, as may be required by the rules and regulations promulgated by the Secretary of Finance, upon recommendation of the Commissioner.
§ The new law increases the personal exemption of individuals to P50,000.00. It removes the personal exemptions amounting to P20,000.00, P25,000.00 and P32,000.00 for single, head of family and married individuals, respectively. Moreover, the definition of a “head of family” has been deleted in Section 35.
§ The new law increases the additional exemption from P8,000.00 for each dependent to P25,000.00 for each dependent, not exceeding four (4). § A ‘dependent’ means a legitimate, illegitimate or legally adopted child chiefly dependent upon and living with the taxpayer if such dependent is not more than twenty-one (21) years of age, unmarried and not gainfully employed or if such dependent, regardless of age, is incapable of self-support because of mental or physical defect.
§ The additional exemption for dependent shall be claimed by only one of the spouses in the case of married individuals. And in the case of legally separated spouses, additional exemptions may be claimed only by the spouse who has custody of the child or children. Provided that the total of additional exemption that may be claimed by both shall not exceed the maximum additional exemptions allowed.
§ Repealing Clause. Any law, presidential decree or issuance, executive order, letter of instruction, administrative order, rule or regulation contrary to or inconsistent with any provision of this Act is hereby
amended or modified accordingly.
§ Effectivity Clause. This Act shall take effect fifteen (15) days following its publication in the Official Gazette or in at least two (2) newspapers of general circulation.
§ The term statutory minimum wage shall refer to the rate fixed by the Regional Tripartite Wage and Productivity Board, as defined by the Bureau of labor and Employment Statistics (BLES) of the Department of Labor and Employment (DOLE). While the term minimum wage earner shall refer to a worker in the private sector paid the statutory minimum wage, or to an employee in the public sector with compensation income of not more than the statutory minimum wage in the non-agricultural sector where he/she is assigned.
§ Section 24 provides that minimum wage earners as defined in Section 22(HH) shall be exempt from the payment of income tax on their taxable income. Moreover, the holiday pay, overtime, night shift differential pay and hazard pay received by such minimum wage earners shall likewise be exempt from income tax.
§ A minimum wage earner or an individual who is exempt from income tax pursuant to the provisions of the 1997 Tax Code and other laws, general or special, shall not be required to file an income tax return.
§ The new law removes in Section 51, the provision stating that “individuals whose pure compensation income derived from sources within the Philippines exceeds Sixty thousand pesos (P60,000) shall file an
income tax return”.
§ Employers are also mandated not to deduct and withhold tax on wages on the income of a minimum wage earner and removes the provision in Section 79 providing “that no withholding of a tax shall be required where the total compensation income of an individual does not exceed the statutory minimum wage, or Five thousand pesos (P5,000.00) per month, whichever is higher.”
§ The new law also amended the provision on Optional Standard Deduction in Section 34, increasing the rate to 40% of gross sales or receipts for individuals subject to tax under Section 24, other than a nonresident alien. The Optional Standard Deduction is not available to taxpayers earning compensation income arising from personal services rendered under an employee-employee relationship.
§ The new law further accorded the option to corporations to elect a standard deduction in an amount not exceeding forty percent (40%) of its gross income as defined in Section 32.
§ Unless the taxpayer signifies in his return his intention to elect the optional standard deduction, he shall be considered as having availed of the itemized deductions allowed in Section 34. Such election when made in the return shall be irrevocable for the taxable year for which the return is made.
§ An individual who is entitled to and claimed for the optional standard deduction shall not be required to submit with his tax return such financial statements otherwise required under the Tax Code. However, said individual shall keep such records pertaining to his gross sales or gross receipts.
§ Corporations availing of the optional standard deduction are still required to submit with its tax return the financial statements required under the Tax Code. The said corporation shall also keep such records
pertaining to his gross income as defined in Section 32 of the Tax Code during the taxable year, as may be required by the rules and regulations promulgated by the Secretary of Finance, upon recommendation of the Commissioner.
§ The new law increases the personal exemption of individuals to P50,000.00. It removes the personal exemptions amounting to P20,000.00, P25,000.00 and P32,000.00 for single, head of family and married individuals, respectively. Moreover, the definition of a “head of family” has been deleted in Section 35.
§ The new law increases the additional exemption from P8,000.00 for each dependent to P25,000.00 for each dependent, not exceeding four (4). § A ‘dependent’ means a legitimate, illegitimate or legally adopted child chiefly dependent upon and living with the taxpayer if such dependent is not more than twenty-one (21) years of age, unmarried and not gainfully employed or if such dependent, regardless of age, is incapable of self-support because of mental or physical defect.
§ The additional exemption for dependent shall be claimed by only one of the spouses in the case of married individuals. And in the case of legally separated spouses, additional exemptions may be claimed only by the spouse who has custody of the child or children. Provided that the total of additional exemption that may be claimed by both shall not exceed the maximum additional exemptions allowed.
§ Repealing Clause. Any law, presidential decree or issuance, executive order, letter of instruction, administrative order, rule or regulation contrary to or inconsistent with any provision of this Act is hereby
amended or modified accordingly.
§ Effectivity Clause. This Act shall take effect fifteen (15) days following its publication in the Official Gazette or in at least two (2) newspapers of general circulation.
