MANILA: Philippines’ revenue board raised individual income tax exemption to PHP82,000 (USD1,827), as compared to its past level of PHP30,000.
The regulations stipulate that the exemption on such benefits, which also include productivity incentives and Christmas bonuses, specifically refers to “exclusions from gross compensation income received by an employee.” It is therefore not applicable to self-employed individuals or to income from business.
Employers have to ensure the correct computation and application of the threshold change in year-end adjustments to the Certificate of Compensation/Tax Withheld, which should be provided by the employer to the employee on or before January 31 of each calendar year.
The new limit is applicable from January 1, 2015, and is expected to benefit approximately half a million employees in both the public and private sectors.
While the Department of Finance originally put the resultant annual tax revenue loss at PHP42bn, others suggested that the revenue impact could be as little as PHP5bn, due to the fact that the additional income received by the employees is likely to be spent on goods that will be subject to tax.
However, in a separate Revenue Memorandum Order, the BIR has disclosed that it expects to lose around PHP16.9bn in tax revenue, and has cut its annual budgetary target in 2015 by that amount, to almost PHP1.674 trillion.
