We often get question from employees like “What is the income tax computation in the Philippines?” or “Am I getting paid correctly?” Filipinos are known to the world as resilient and extremely hardworking people. The country’s status as a third world country and its harsh environments have hardened the people who live in it, and have helped them subconsciously develop an unbreakable will to show up at work and give their all every day.
However, despite the consistency in quality that Filipino workers provide, they don’t always get the compensation they rightfully deserve. People who are familiar with how to calculate tax return and other compliance issues know this very well, but those who aren’t can only wonder why they aren’t earning the amount they know they should be.
Filipinos just don’t know how to quit. To them, a job is more than just a means to provide for their respective families—it is also their gateway to a better career and a more secure future; hence, they don’t give anything less than their absolute best. Of course, when they feel like they aren’t getting what they deserve, they are likely to lose interest, which is by no means beneficial to the company they are working for.
This is where the knowledge of tax computation and how to calculate income tax return in the Philippines comes into play.
Until only in the recent months when the TRAIN Law was implemented, the income tax was responsible for consuming a quite huge chunk of an employee’s salary. Filipino workers have grown used to this and thus have learned to expect at least a few thousands off their payslip, without knowing whether it’s the correct amount or not.
While tax computation may seem like a tedious and complicated process, it is nonetheless useful to at least be familiar with it. It lets employees know how much they should be getting, and if something in the numbers are off. After all, Filipinos, for all their dedication to their jobs regardless of the difficulty, deserve to be compensated fairly, down to the very last centavo.
So make sure that you don’t just devote attention to tax filing in the Philippines, but also on how to compute your tax!
An Overview of Common Jobs in the Philippines
There are a number of factors that contribute to the labor industry of the Philippines.
One is the geography, which opens up thousands jobs in fishery, farming, and mining, to name of few. Another one is the lower labor costs compared to other countries, making the Philippines a top outsourcing country. There are many other factors that help in defining the Filipino workforce as a whole, but there isn’t really a single line of work that can represent the entire country.
Regardless, Filipinos in general have the potential to excel in any field they are assigned to, and have a tremendous capacity to learn and improve. Listed below are the various areas of labor that Filipinos commonly work in:
Agriculture
The Philippines is rich in fields and other landforms that are perfect for growing plants and crops. It is a leading exporter of rice, coconut, and fruits among others—indeed, agriculture plays a major role in the economy of the country.
Farming is a prominent occupation in the Philippines. Farmers work hard as they can, and the fruit of their labor is truly palpable with the success the country is experiencing in the trading industry. Rice is a staple in the daily meals of Filipinos as well, therefore making farming vital, and ensuring that there are always job opportunities for many people to take advantage of.
In addition, there is also fishing, which is another major profession in the country due to its abundance in bodies of water. Thousands of workers are needed to haul in fish, another primary food source in the Philippines, every day.
Construction
Despite having a small frame when compared to people of other races, Filipinos are, by no means, physically inferior—in fact, they are quite strong and durable. This makes them naturally talented in construction work, as they are able to lift hefty weights and operate heavy duty equipment without exerting too much effort.
Originating from their ancestors, Filipinos are also adept at building houses and other crafts such as boats and furniture. Working with wood is like second nature to them, and since it is considered as an art, Filipinos have the innate potential to be artists if they decide to put their heart into it.
Housework
There are various titles to a person who performs housework—domestic helpers, maids, and kasambahays to name a few. Whatever the case may be, Filipinos seemingly have a natural affinity to keeping houses clean and to keep them in one piece. Due to their obvious talent in this field, housework is a very common profession for millions of Filipinos, both in the country and abroad.
Housework extends beyond sweeping the floor and wiping the windows—this also covers laundry, cooking, and assisting the house owner in keeping the house in the best possible condition.
Transportation
With a large population and a huge number of the offices in the country closely packed together in urban centers, numerous transportation options are necessary. People have places to go all the time, and unless everyone in the country has their own car, things are going to get messy.
Drivers will always be needed in the Philippines, or in any other country for that matter. Someone will always have to be able to take commuters from point A to point B, and because of the sheer size of the population, there is always the need for more vehicles to accommodate them all, and by extension, more drivers.
BPO
BPO companies, usually in the form of call centers, are always hiring—new graduates commonly opt to work in this industry after they graduate. The BPO industry is considered by the majority to be the training ground of new members of the workforce, causing many to leave their respective companies once they have gained enough experience.
BPOs actually pay quite well and usually offer complete benefits, however. This is why it is one of the industries in the country that many people wish to work in. Filipinos primarily aim to have a stable income that can provide for themselves and whoever may be dependent on them—and BPOs are capable of giving them just that.
Minimum Wages
The minimum wage in the Philippines has always sparked criticisms and controversies. People have repeatedly voiced out their concerns through rallies all across the country. The common complaint that workers have is that while it may be enough to sustain one person, it can’t support people with families depending on them, which is the case for a major portion of the entire workforce.
Another concern is that the minimum wage is acceptable for new hires, as the salary increases over time; that is, with the development of their careers. For the majority of workers, however, things are much more difficult as they don’t experience any increase, or even any career growth. Imagine going to work day in and day out, working as best you can, for years, or decades—all while getting paid only the minimum. Visualizing yourself in that situation is already difficult, but it’s something millions of people go through every day.
Currently, the minimum wage in Metro Manila sits at P512, for non-agricultural workers. It was previously P491 until the last September 2017. For workers in the agriculture, retail, and service industry, the minimum wage is P475.
The Current Situation of Minimum Wage Earners
Until now, people are constantly telling the government that the minimum wage isn’t enough, especially since the cost of goods can only go up over time—the increase in is only 4.27% of the previous minimum wage. Because of this, a likely scenario is that Filipinos with families to support will be forced to settle for less nutritious food and supplies of lesser qualities just to make ends meet.
The Philippines is known as a major exporting country in the world. The very same farmers who are largely responsible for the gross domestic product live on minimum wage.
Times are changing. Basic necessities such as food and shelter, and education, all require considerable amounts of money. Nobody should be living on minimum wage their whole life, as this can compromise not only their future, but that of the generations that will come from them as well.
How to Compute your Salary and How to Calculate Income Tax Return
To a certain extent, it can be said that it isn’t common to know about tax computation in the Philippines. While some are content with just making money, others prefer to go into detail, and understand how their income ended up with whatever numbers it has.
Tax computation can appear to be confusing because of all the numbers and all the tables, but the majority of them are used as references only for the process of calculating itself. Good thing that there are online tax calculators available in the Philippines to make everything easier for you.
So, Waht is the income tax computation Philippines for employed individuals?
- Compute for the Taxable Income
You’re not going to deduct your income tax from the get-go. Before anything else, you’ll need to compute for your taxable income, which is your basic salary (plus additional pays like holiday and overtime pays) minus your contributions.
Taxable Income = (Monthly Basic Pay + Additional Pay) – (SSS + PhilHealth + PAG-IBIG + Deductions Due to Absences/Tardiness)
SSS Contribution Table:
Below is the PhilHealth contribution table:
Below is the Pagibig contribution table:
Once you have computed for your taxable income, proceed to computing for the income tax.
- Compute for the Income Tax
Tax computation in the Philippines changed last January 1, 2023. The updated Withholding tax table is seen below.
BIR Withholding Tax Table
Income Tax = (((Taxable Income * 12) – X) * Y) / 12
Where X is the minimum value of the particular salary range, and Y is the respective percentage
Now that you know your Income tax and how to calculate income tax return for the form, what form do I use? Do I need to submit this to the BIR?
All employees are covered under substituted filing, meaning to say, the employer (as seen above) withholds the taxes that you need to pay to the BIR. They will then give the employee a copy of the 2316, showing the amount remitted to the BIR. Now that you know how to calculate income tax return, you can double check the figures in your BIR form 2316.
Worry About Your Taxes Less with Taxumo
Handling your taxes can be a tedious and complicated process, especially if you have your own business and are keeping a close eye on it. The entire process of scheduling and filling out papers can be too troublesome at times, but there’s no need to worry—we here at Taxumo can help you out.
We know how valuable time is. That’s why with us, the process of computing, filing, and paying your taxes is made incredibly easier so you can focus more on your work. Forget about being confused and intimidated with how tax computation in the Philippines works, and let us take the wheel.
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