Tax notes: Minimum wage earners’ income tax exemption

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Monday, February 7, 2011

THE Bureau of Internal Revenue (BIR) has clarified the following points regarding the income tax exemption of minimum wage earners (MWE), under Revenue Memorandum Circular 91-2010:

Employee who receives statutory minimum wage (SMW) but is later promoted along with a salary increase beyond SMW – still exempt from income tax during the period that the employee’s salary did not exceed the SMW and taxable on the periods when his/her salary exceed the personal and additional exemption allowance.

Employee who receives additional income from business—shall be subject to tax on his/her entire salary earned during the year and income from his/her business. The MWE shall not enjoy exemption from income tax since he/she is earning other income aside from his/her salary. In this case, the employer is required to withhold income tax from the total salary paid during the period.


Employee who receives SMW from two or more employers—employee shall cease to be a MWE since his/her two employers exceeds the prevailing minimum wage.

Employee who receives commissions in addition to the SMW—shall be subject to income tax and consequently to withholding tax on the entire amount paid by the employer (SMW and commission). The commission received is not one of the enumerated exemptions under Republic Act (RA) 9504. Under RA 9504, the income of MWEs that are exempt from income tax are the SMW, holiday pay, hazard pay, night-shift differential and overtime pay.

(Punongbayan & Araullo)

Published in the Sun.Star Cebu newspaper on February 08, 2011.


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