COMPENSATION INCOME
May compensation kapag merong employee-employer relationship
Applicable sa lahat ng manggagawa
Hindi important ang term na ginamit like salary, wages, commission. Taxable.
Hindi rin importante ang timing or basis ng pagsweldo. (daily, monthly, annually)
FORMS OF COMPENSATION
1. Compensation paid in kind – hindi pera; measured at FMV
2. Living quarters and meals – upa or pagkain, taxable sa pov ni employee, not taxable if it
benefits the employer
3. Facilities and privileges of relatively small values (de minimis)
4. Tips and gratuities – taxable but hindi kasama sa winiwithheld ni employer
5. Pension, retirement and separation pay – taxable
*Retirement plan / pension is not taxable if ginawa ng empoyer at inapply sa BIR then
inacknowledge ni BIR.
*Hindi lahat ng pension ay exempt.
*Separation pays – not taxable if hindi ginusto ng employee. E.g injuries, health
problems
6. Fixed or variable transportation, representation, and other allowances – same treatment as
number 2. Not taxable.
7. Vacation and sick leave allowances – exempted most of the time
*Can be taxable if employee ng private company kapag umabot ng more than 10, not
taxable kapag under government.
8. Deductions made by employer from compensation of employee – taxable; gross ang basis
9. Remuneration for services as employee of NRA individual / foreign entity – taxable
engaged in business or not
10. Compensation for services performed outside the Philippines – taxable. Resident citizen
is taxable within or without the Philippines.
NON – TAXABLE COMPENSATION
a. Mandatory deductions – mandatory contribution to GSIS, SSS, Philhealth, HDMF, and
union dues
b. Exempt benefits
1. Benefits excluded/ exempted under the NIRC and special laws
2. Benefits exempt under treaty or international agreements
3. Benefits necessary to the trade, business, or conduct or profession of the employer
4. Benefits for the convenience or advantage of the employer
EXEMPT BENEFITS UNDER THE NIRC, AS AMENDED, AND SPECIAL LAWS
1.
2.
3.
4.
Remunerations received as incidents of employment
De minimis benefits
13th month pay and other benefits not exceeding P90,000
Certain benefits of minimum wage earners
DE MINIMIS BENEFITS (tax exempt)
Facilities or privileges furnished or offered by an employer to his/her employees that are relatively
small value and are offered or furnished by the employer merely as a means of promoting health,
goodwill, contentment, or efficiency of his/her employees.
Taxable de minimis – excess of the limit
Monetized value of vacation leave credits of
not exceeding 10 days during the year
private employees
Monetized value of vacation and sick leave
credits paid to government officials and No limit, not taxable.
employees
2,000 or 1 sack of 50kg rice per month
Rice subsidy
amounting to not more than 2,000.
Daily meal allowance for overtime work and 25% of the basic minimum wage on a per
night shift
region basis.
not exceeding 6,000 per annum
Uniform and clothing allowance
Laundry allowance
Medical cash allowance to dependents of
employees
Actual medical assistance
Gifts given during Christmas and major
anniversary celebrations
not exceeding 300 per month
not exceeding 1,500 per employee per
semester or 250 per month, 3,000 per annum
not exceeding 10,000
not exceeding 5,000 per employee per annum
must be in form of tangible property other than
cash or gift certificates, with an annual
monetary value not exceeding 10,000
Benefits received by an employee by virtue of combined do not exceed 10,000 per employee
a collective bargaining agreement (CBA) and per taxable year.
productivity incentive schemes
Employee achievement award
Notes:


10 – day rule applies only to vacation leaves for private employees
Vacation leave and sick leave of government employees are not subject to the 10 – day
rule
TAX MODEL ON COMPENSATION INCOME
Gross compensation income
xxx,xxx
Less: Non – taxable compensation
xxx,xxx
Taxable compensation income
xxx,xxx
Treatment for taxable de minimis benefits
a. Rank file employees – compensation income under “13th month pay and other benefits”
b. Managerial and supervisory employees – treated as fringe benefit subject to final fringe
benefit tax
REGULAR COMPENSATION INCOME
Includes fixed remunerations such as:
1. Basic salary
2. Fixed allowances – allowances which are fixed in amount and regularly received as
part of the basic salary
SUPPLEMENTARY COMPENSATION
Includes performance – based renumerations to an employee in addition to the regular
compensation with or without regard to payroll period.
1. Overtime pay
2. Hazard pay
3. Night shift differential pay
4. Holiday pay
5. Commissions
6. Fees, including director’s fees
7. Emoluments and honoraria
8. Taxable retirement and separation pay
9. Value of living quarters or meals
10. Gains on exercise of stock options
11. Profit sharing and taxable bonuses
Stock option plans
Book value or fair value of stocks (whichever is higher)
xxx,xxx
Less: Exercise price of option
xxx,xxx
Compensation income (discount)
xxx,xxx
13th Month Pay and Other Benefits Includes:
1. 13th month pay
Government employee- Christmas bonus equivalent to one month salary + 5,000
cash gift
Private employee- equivalent to one month salary
2. Other benefits
a. Christmas bonus
b. Cash gifts
c. Additional compensation allowance
d. 14th month pay, 15th month pay, etc.
e. Other fringe benefits (rank file employees)
Christmas Bonus
Christmas Gift
Government
Employees
th
13 Month Pay and
Other Benefits
13th Month Pay and
Other Benefits
Private Employees
13th Month Pay and
Other Benefits
De Minimis