Tuesday, January 17, 2006
Tax notes: Withholding tax exemption
Pursuant to Revenue Regulations 1-2006, the following income payments shall be exempt from withholding tax on compensation effective Jan. 1, 2006:
1. Individuals whose compensation income do not exceed the statutory minimum wage or P5,000 per month (P60,000 per year), whichever is higher
2. Government employees under salary grades 1 to 3.
Said employees shall, however, be required to file their annual income tax returns and pay the income tax, if any, on or before April 15. They shall not be qualified for substituted filing.
On the part of the employers, such income payments, although not subjected to withholding taxes, shall be allowed as deductible expenses if the employer issues the proper withholding statement [Bureau of Internal Revenue (BIR) Form 2316] and includes the employees in the alphabetical listing under Schedule 7.2 of BIR form 1604 CF.
Prior to this regulation, a minimum wage earner already has the option not to be subjected to withholding tax provided that he files his annual income tax and pay the income tax due, if any, on or before April 15. This option has been withdrawn under this new regulation. (Source: Punongbayan & Araullo)
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