RMC No. 01-2018: Prescribes the procedures on the use of Withholding Tax Table on Compensation Income and advises on the change of Creditable Withholding Tax Rate on certain income payments to individuals

Key points

1. Table to use. Employers withhold tax on compensation using the revised Withholding Tax table, version 2, found in Annex A of the Circular.
2. Four computation steps. The employer totals the monetary and non-monetary compensation for the payroll period, separating non-taxable benefits and mandatory contributions. It then picks the table for that period, finds the employee’s compensation range, and adds the predetermined tax for that range to the tax on the excess over the range minimum.
3. Payroll periods covered. The tables apply to monthly, semi-monthly, weekly or daily payroll periods. The Circular includes sample computations.
4. 8% Creditable Withholding Tax. Certain income payments to self-employed individuals or professionals are subject to 8% Creditable Withholding Tax. These include professional fees, talent fees and commissions for services by individuals, income distributions to beneficiaries of Estates and Trusts, and payments to certain brokers and agents.
5. More payments at 8%. The same 8% applies to income payments to partners of a general professional partnership and professional fees paid to medical practitioners. It also covers commissions of independent or exclusive sales representatives and marketing agents of companies.

Who is affected

• Employers paying compensation
• Employees receiving compensation
• Self-employed individuals and professionals