Question & AnswerQ&A (Republic Act No. 590)
The tax rate is five percent per annum upon the amount by which the total net income does not exceed two thousand pesos.
A tax equal to sixteen percent is levied on the entire net income received from all sources within the Philippines by nonresident alien individuals not engaged in trade or business within the Philippines. However, if their income exceeds fourteen thousand seven hundred and fifty pesos, the rates in Section 21 apply.
Single individuals or married persons legally separated are allowed a personal exemption of one thousand eight hundred pesos.
Married persons not legally separated or heads of family are allowed a personal exemption of three thousand pesos, with only one exemption allowed from the aggregate income of both spouses when not legally separated.
An additional exemption of six hundred pesos is allowed for each legitimate, recognized natural, or adopted child wholly dependent upon the taxpayer if such dependents are under 21 years of age or incapable of self-support due to mental or physical defects, provided the taxpayer is the head of the family.
A tax of sixteen percent is levied annually on the total net income of every corporation organized or existing under Philippine laws, excluding registered general copartnerships.
Employers must deduct and withhold income tax on wages based on a withholding table prepared by the Secretary of Finance. This tax must be paid and reported quarterly, with provisions for statements to employees and returns to the government.
Wages include all remuneration for services performed by an employee for the employer, including cash value of remuneration not paid in cash, except remuneration for agricultural labor paid in products, domestic service in a private home, casual labor not in trade or business, and services to foreign governments or international organizations.
Persons who willfully file false or fraudulent returns or fail to file required statements may be fined between one thousand to two thousand pesos and imprisoned for up to one year. Similar penalties apply to individuals providing false exemption certificates and to corporate officers responsible.
The employer is liable for the payment of the tax required to be deducted and withheld under the supplement and is not liable to any person for such payment.
The husband is deemed the head of the family and claimant of additional exemptions for dependents. Taxes on the wife's wages are withheld according to the zero exemption schedule.
Refunds or credits for overpayment are made to the employer only to the extent that the overpaid amount was not deducted and withheld by the employer. Employees may claim credits for amounts deducted and withheld during the year against their income tax liability.
An employee must file a signed withholding exemption certificate on or before commencing employment or within ten days from the effective date of the Act if already employed.
Fractions of less than fifty centavos in net income computation are disregarded, while fractions of fifty centavos or more are rounded up to one peso. Overpayments or underpayments of less than one peso are not refunded or collected.