Prescribes the Procedures on the Use of Withholding Tax Table on Compensation Income and Advises on the Change of Creditable Withholding Tax Rate on Certain Income Payments to Individuals

January 4, 2018 REVENUE MEMORANDUM CIRCULAR NO. 001-18 SUBJECT : Prescribes the Procedures on the Use of Withholding Tax Table on Compensation Income and Advises on the Change of Creditable Withholding Tax Rate on Certain Income Payments to Individuals TO : All Internal Revenue Officials, Employees and Others Concerned This Revenue Memorandum Circular (RMC) is issued pursuant to the amendments to the National Internal Revenue Code introduced under Republic Act No. 10963, effective January 1, 2018, with the following objectives: (A) To supplement RMC No. 105-2017 dated December 28, 2017 by providing the steps on how to use the revised Withholding Tax Table on Compensation; and (B) To advise on the change in the Creditable Withholding Tax Rate on Income Payments to Self-employed Individuals or Professionals. A. Steps in the Use of the Withholding Tax Table In general, every employer paying compensation to its employee/s shall deduct and withhold from such compensation a tax determined in accordance with the prescribed Revised Withholding Tax Tables, version 2 (Annex "A"). Step 1 . Determine the total amount of monetary and non-monetary compensation paid to an employee for the payroll period: monthly, semi-monthly, weekly or daily, as the case may be, segregating non-taxable benefits and mandatory contributions. Step 2 . Use the appropriate table in Annex "A" for the applicable payroll period. Step 3 . Determine the compensation range of the employee and apply the applicable tax rates prescribed thereon. Step 4 . Compute the withholding tax due by adding the tax predetermined in the compensation range indicated on the column used and the tax on the excess of the total compensation over the minimum of the compensation range. Sample Computations Using the Withholding Tax Tables The following are sample computations of withholding tax on compensation using the prescribed withholding tax tables: Example 1 : An employee receiving daily compensation in the amount of P2,500.00, net of mandatory contributions. Computation : By using the daily withholding tax table, the withholding tax beginning January 2018 is computed by referring to compensation range under column 4 which shows a predetermined tax of P356.16 on P2,192.00 plus 30% of the excess of Compensation Range (Minimum) amounting to P308.00 (P2,500.00 - P2,192.00) which is P92.40. As such, the withholding tax to be withheld by the employer shall be P448.56. Total taxable compensation P2,500.00 Less: Compensation Range (Minimum) 2,192.00 Excess P308.00 ======== Withholding tax shall be computed as follows: Predetermined Tax on P2,192.00 P356.16 Add: Tax on the excess (P308.00 x 30%) 92.40 Total daily withholding tax P448.56 ======== Example 2 : An employee receiving weekly compensation in the amount of P9,500.00, net of mandatory contributions. Computation : By using the weekly withholding tax table, the withholding tax beginning January 2018 is computed by referring to compensation range under column 3 which shows a predetermined tax of P576.92 on P7,692.00 plus 25% of the excess of Compensation Range (Minimum) amounting to P1,808.00 (P9,500.00 - P7,692.00) which is P452.00. As such, the withholding tax to be withheld by the employer shall be P1,028.92. Total taxable compensation P9,500.00 Less: Compensation Range (Minimum) 7,692.00 Excess P1,808.00 ======== Withholding tax shall be computed as follows: Tax on P7,692.00 P576.92 Tax on the excess (P1,808.00 x 25%) 452.00 Total weekly withholding tax P1 , 028.92 ======== Example 3 : An employee receiving semi-monthly compensation in the amount of P15,500.00, net of mandatory contributions. Computation : By using the semi-monthly withholding tax table, the withholding tax beginning January 2018 is computed by referring to compensation range under column 2 which shows a predetermined tax of P0.00 on P10,417.00 plus 20% of the excess of Compensation Range (Minimum) amounting to P5,083.00 (P15,500.00 - P10,417.00) which is P1,016.60. As such, the withholding tax to be withheld by the employer shall be P1,016.60. Total taxable compensation P15,500.00 Less: Compensation Range (Minimum) 10,417.00 Excess P5,083.00 ======== Withholding tax shall be computed as follows: Tax on P10,417.00 P0.00 Tax on the excess (P5,083.00 x 20%) 1, 0 16.60 Total semi-monthly withholding tax P1 ,0 16.60 ======== Example 4 : An employee receiving monthly compensation in the amount of P170,500.00 with supplemental compensation in the amount of P5,000.00, net of mandatory contributions. Computation : By using the monthly withholding tax table, the withholding tax beginning January 2018 is computed by referring to compensation range under column 2 which shows a predetermined tax of P40,833.33 on P166,667.00 plus 32% of the excess of Compensation Range (Minimum) amounting to P8,833.00 (P170,500.00 + P5,000 - P166,667.00) which is P2,826.56. As such, the withholding tax to be withheld by the employer shall be P43,659.89. Total taxable compensation P170,500.00 Less: Compensation Range (Minimum) 166,667.00 Excess P3,833.00 Add: Supplemental Compensation 5,000.00 Total Taxable compensation for the month P8,833.00 ========= Withholding tax shall be computed as follows: Tax on P166,667.00 P40,833.33 Tax on the excess including supplemental compensation (P8,833.00 x 32%) 2,826.56 Total monthly withholding tax P43,659.89 ========= B. Change in the Creditable Withholding Tax Rate on Income Payments to Self - employed Individuals or Professionals The following Income Payments to Self-employed Individuals or Professionals shall be subject to Eight Percent (8%): 1 . Professional fees, talent fees, commissions, etc. for services rendered by individuals; 2. Income distribution to beneficiaries of Estates and Trusts; 3. Income Payment to certain brokers and agents; 4. Income Payments to partners of general professional partnership; 5. Professional fees paid to medical practitioners; and 6. Commission of independent and/or exclusive sales representatives, and marketing agents of companies. All internal revenue officials, employees and others concerned are hereby enjoined to give this Circular as wide a publicity as possible. (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue ANNEX A REVISED WITHHOLDING TAX TABLE (version 2) Effective January 1, 2018 to December 31, 2022 DAILY 1 2 3 4 5 6 Compensation Range P685 and below P685-P1,095 P1,096-P2,191 P2,192-P5,478 P5,479-P21,917 P21,918 and above Prescribed Withholding Tax 0.00 0.00 + 20% over P685 P82.19 + 25% over P1,096 P356.16 + 30% over P2,192 P1,342.47 + 32% over P5,479 P6,602.74 + 35% over P21,918 WEEKLY 1 2 3 4 5 6 Compensation Range P4,808 and below P4,808-P7,691 P7,692-P15,384 P15,385-P38,461 P38,462-P153,845 P153,846 and above Prescribed Withholding Tax 0.00 0.00 + 20% over P4,808 P576.92 + 25% over P7,692 P2,500.00 + 30% over P15,385 P9,423.08 + 32% over P38,462 P46,346.15 + 35% over P153,846 SEMI-MONTHLY 1 2 3 4 5 6 Compensation Range P10,417 and below P10,417-P16,666 P16,667-P33,332 P33,333-P83,332 P83,333-P333,332 P333,333 and above Prescribed Withholding Tax 0.00 0.00 + 20% over P10,417 1,250.00 + 25% over P16,667 5,416.67 + 30% over P33,333 20,416.67 + 32% over P83,333 100,416.67 35% over P333,333 MONTHLY 1 2 3 4 5 6 Compensation Range P20,833 and below P20,833-P33,332 P33,333-P66,666 P66,667-P166,666 P166,667-P666,666 P666,667 and above Prescribed Withholding Tax 0.00 0.0 + 20% over P20,833 P2,500.00 + 25% over P33,333 P10,833.33 + 30% over P66,667 P40,833.33 + 32% over P166,667 P200,833.33 + 35% over P666,667