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Questions and Answers
The annual gift limit during Christmas celebrations per employee is P10,000.
The annual gift limit during Christmas celebrations per employee is P10,000.
False
A laundry allowance can be given to employees up to P500 per month.
A laundry allowance can be given to employees up to P500 per month.
False
Actual medical assistance benefits can exceed P10,000 per annum for healthcare needs.
Actual medical assistance benefits can exceed P10,000 per annum for healthcare needs.
False
Employees can receive performance awards in cash or in the form of a gift certificate as part of their benefits.
Employees can receive performance awards in cash or in the form of a gift certificate as part of their benefits.
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The actual daily meal allowance for overtime work can reach up to 20% of the basic minimum wage.
The actual daily meal allowance for overtime work can reach up to 20% of the basic minimum wage.
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The combined value of benefits received through both collective bargaining agreements and productivity incentives must not exceed P20,000 per year.
The combined value of benefits received through both collective bargaining agreements and productivity incentives must not exceed P20,000 per year.
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The Thirteenth month pay is exempt from taxes if it does not exceed P90,000.
The Thirteenth month pay is exempt from taxes if it does not exceed P90,000.
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Employers are responsible for withholding taxes on compensation for employees receiving de minimis benefits.
Employers are responsible for withholding taxes on compensation for employees receiving de minimis benefits.
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Medical check-ups as a de minimis benefit can cumulatively exceed P10,000 per annum.
Medical check-ups as a de minimis benefit can cumulatively exceed P10,000 per annum.
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All employees can receive uniform and clothing allowances up to P6,000 per quarter.
All employees can receive uniform and clothing allowances up to P6,000 per quarter.
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Withholding tax on compensation only applies to citizens employed in the Philippines.
Withholding tax on compensation only applies to citizens employed in the Philippines.
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Compensation is defined as remuneration for services performed only when an employer-employee relationship exists.
Compensation is defined as remuneration for services performed only when an employer-employee relationship exists.
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All forms of remuneration received by employees are subject to withholding tax.
All forms of remuneration received by employees are subject to withholding tax.
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A medical cash allowance for employee dependents not exceeding P250 per month is classified as taxable compensation.
A medical cash allowance for employee dependents not exceeding P250 per month is classified as taxable compensation.
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An employer is responsible for collecting the withholding tax on compensation from employees.
An employer is responsible for collecting the withholding tax on compensation from employees.
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Monetized unused vacation leave credits exceeding ten days are exempt from withholding tax.
Monetized unused vacation leave credits exceeding ten days are exempt from withholding tax.
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Rice subsidies of P2,000 or one sack of 50 kg are considered as taxable compensation.
Rice subsidies of P2,000 or one sack of 50 kg are considered as taxable compensation.
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The designation of remuneration determines if it constitutes compensation for tax purposes.
The designation of remuneration determines if it constitutes compensation for tax purposes.
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Compensation includes remuneration for services performed by employees only during their period of employment.
Compensation includes remuneration for services performed by employees only during their period of employment.
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De Minimis benefits can be offered by employers to employees without being subject to income tax.
De Minimis benefits can be offered by employers to employees without being subject to income tax.
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Study Notes
Withholding Tax on Compensation
- Withholding tax on compensation is a method of collecting income tax at the source upon receipt of income.
- This applies to all employed individuals, citizens or aliens, earning income from compensation for services rendered in the Philippines.
- The employer acts as the withholding agent.
- Section 2.78 of RR 2098, as amended, governs this process.
Compensation Income Defined
- "Compensation" generally means all payment for services performed by an employee for their employer under an employer-employee relationship, unless specifically excluded by relevant laws.
- The name given to the payment and the basis for payment are irrelevant in determining if it constitutes compensation.
- Compensation is considered even if the employer-employee relationship no longer exists at the time of payment.
"De Minimis" Benefits
- Benefits furnished by employers to employees, considered "de minimis" (trivial) are not subject to income tax and withholding if they are of relatively small value and offered to promote employee health, goodwill, contentment, or efficiency.
Examples of "De Minimis" Benefits
- Monetized unused vacation leave credits (up to 10 days).
- Monetized vacation and sick leave credits for government employees.
- Medical cash allowance for dependents (up to P1,500 per semester or P250 per month).
- Rice subsidy (up to a specific amount or value per month).
- Uniform and clothing allowance (up to P6,000 per year).
- Actual medical assistance (e.g., medical allowance, check-ups, maternity assistance), up to P10,000 per year.
- Laundry allowance (up to P300 per month).
- Employee achievement awards (tangible property not cash, up to P10,000 yearly).
- Gifts during Christmas and other holidays (up to P5,000 annually).
- Daily meal allowance for overtime/night shifts (up to 25% of the basic minimum wage).
- Benefits from collective bargaining agreements (CBAs) and productivity incentive schemes, with combined annual totals not exceeding P10,000.
Amount in Excess of "De Minimis" Benefits
- Any amount exceeding the "de minimis" threshold is included in the 13th-month pay and other benefits threshold.
- Excess amounts are subject either to withholding tax on compensation (for rank-and-file employees) or fringe benefits tax (for managerial and supervisory).
Thirteenth (13th) Month Pay and Other Benefits
- Amounts paid in the form of 13th-month pay and other benefits are not taxed if the total amount does not exceed P90,000.
- Rules and regulations issued by the Secretary of Finance, upon recommendation by the Commissioner (of relevant agency), can adjust this limit.
Exempt Statutory Contributions
- GSIS, SSS, Medicare, Pag-IBIG, and union dues are exempt.
BIR Form No. 2316
- Employers must issue a certificate (BIR Form No. 2316) to each employee with details of total compensation and withheld taxes each year.
- The certificate is attached to the Annual Income Tax Return.
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Description
This quiz explores the concept of withholding tax on compensation, focusing on its application in the Philippines. It covers definitions of compensation income, the role of the employer as a withholding agent, and the treatment of 'de minimis' benefits. Test your knowledge on the intricacies of tax collection at the source!
