QuestionsQuestions (Republic Act No. 9504)
RA 9504 amends specific sections of the NIRC (RA 8424), particularly on definitions, income tax rates, deductions, personal and dependent exemptions, individual income tax return requirements, and withholding tax rules affecting minimum wage earners.
It refers to: (1) a worker in the private sector paid the statutory minimum wage; or (2) an employee in the public sector whose compensation income is not more than the statutory minimum wage in the non-agricultural sector where assigned.
Minimum wage earners are exempt from payment of income tax on their taxable income.
Yes. Holiday pay, overtime pay, night shift differential pay, and hazard pay received by minimum wage earners are likewise exempt from income tax.
RA 9504 amends: Section 22, Section 24(A), Section 34(L), Section 35(A) and (B), Section 51(A)(2), and Section 79(A).
It retains/sets the graduated income tax schedule for individuals, including a proviso exempting minimum wage earners from income tax on taxable income, and extends the exemption to specified types of pay.
The husband and wife compute separately their respective individual income tax based on their respective total taxable income, subject to Section 51(D); if income cannot be definitely attributed to one spouse, it is divided equally between the spouses for determining taxable income.
An individual subject to tax under Section 24 (other than nonresident alien) may elect a standard deduction not exceeding 40% of gross sales or gross receipts; corporations may elect not exceeding 40% of gross income as defined in Section 32.
The taxpayer must signify the intention to elect the OSD in the return. The election is irrevocable for the taxable year for which the return is made.
The individual entitled to and who claimed the OSD is not required to submit with the tax return the financial statements otherwise required under the Code (though records pertaining to gross sales or gross receipts must still be kept, unless the Commissioner otherwise permits).
It is P50,000 for each individual taxpayer.
Only the spouse deriving gross income is allowed the personal exemption.
An additional exemption of P25,000 is allowed for each dependent not exceeding four (4). A 'dependent' is a child (legitimate, illegitimate, or legally adopted) chiefly dependent upon and living with the taxpayer, not more than 21 years old, unmarried and not gainfully employed, or regardless of age if incapable of self-support due to mental or physical defect.
The additional exemptions for dependents may be claimed by only one of the spouses.
Additional exemptions may be claimed only by the spouse who has custody of the child or children. However, the total additional exemptions claimed by both spouses cannot exceed the maximum allowed.
Among others, an individual with respect to pure compensation income whose income tax has been correctly withheld under Section 79 is not required to file a return, except when deriving compensation concurrently from two or more employers at any time during the taxable year. Also, minimum wage earners as defined in Section 22(HH) or those exempt from income tax pursuant to the Code and other laws are not required to file.
Withholding is required from every employer making payment of wages, but the rule is expressly excepted in the case of a minimum wage earner as defined in Section 22(HH); therefore, employers should not withhold income tax on wages of minimum wage earners under the exception.