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Rosben Orbeso Murillo, CPA

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Studied at Saint Paul School of Professional Studies
Work Experiences:
Taught both Accounting and Taxation for more than six (6) years.
Former Tax CPA reviewer at SPSBL CPA review center.
Rosben Orbeso Murillo, CPA
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Did you know that some taxes are confusing to the government to collect? One of these taxes is withholding tax train law. What is really the impact of train law on withholding tax? Does it make better or get worst?  Let’s see the impact of train law on withholding tax. In this article, you will know the increase or decrease in the withholding tax rate and any changes to creditable and expanded withholding tax. These updates discuss the new withholding tax rates, withholding tax tables and how to compute withholding tax. Let’s understand first what we should learn from this withholding tax under train law 2018.

Withholding Tax Train Law 2019 Meaning

Before we know the updates, it is best for us to know what withholding tax means. The amount of tax withheld is on the income of the recipient not covered by the income tax rate. The fee is withheld or deducted from the amount received by the recipient.

Tax withheld by the government can be refunded by the recipient if the total tax withheld is more significant than the actual fee to be paid by the recipient of income.

Subject to Withholding Tax Train Law

Citizen or a Resident Alien Individual

Some taxes could be challenging for the government to collect. Here are some updates of income that are subject to withholding tax.

  1. Twenty percent (20%) final tax on the Interest income from any peso bank deposit, and yield or any monetary benefit from deposit substitutes is collected. It includes trust funds and similar arrangements, royalties, prizes, and other winnings derived from sources within the Philippines.
  2. Fifteen percent (15%) final tax withholding on the interest income from a depository bank. This depository bank is under the EFCDS-Expanded Foreign Currency Deposit System.
  3. Ten percent (10%) final tax withhold on cash or property dividends. Either, actually or constructively received from a company and ROH of multinational companies.
  4. Withhold a 10% on the share of an individual in the distributable net income after tax of a partner in a partnership. It excludes GPP or on the share in the net profit after tax of an association, a joint account or a joint venture or consortium taxable as a corporation in which he is a member or co-venturer.
  5. Fifteen percent (15%) on capital gains from the sale of shares of stock not traded in the stock exchange.

Non-resident Aliens Engaged in Trade or Business

Fifteen percent (15%) of a final tax capital gains from the sale of shares of stock not traded. It should be the net capital gains realized during the taxable year from the sale, barter, transfer, or other disposition of shares to stock in a domestic corporation.

Non-resident Alien Individual Not Engage in Trade or Business

Generally, all incomes realized by the non-resident alien individual not engaged in trade or business within the Philippines are subject to final withholding tax. In 2018, updates on capital gains from the sale of shares of stock not traded in the stock exchange were subject to fifteen percent (15%) of the final tax.

Latest Updates on Train Tax Law 2019:


Subject to Expanded Withholding Tax Train Law

Income Payment to a Domestic Corporation

Some of these updates include the interest income derived from the following:

  1. Depository bank under the expanded foreign currency deposit system
  2. Capital gains from the sale of shares of stock not traded in the stock exchange.

15% Final tax withholding on the interest income from deposits under EFDCS. This withholding tax rate applies to capital gains realized during the taxable year from the sale, barter, exchange. Withhold 15% on the disposition of shares of stock in a domestic corporation is fifteen percent (15%).

Fringe Benefits Granted to a Non-rank and File Employees

The particular law mandates some benefits in the Philippines to all employees. These benefits are called as de minimis benefits. However, there are benefits given by the employer to a non-rank and file employees to pay their loyalty or longtime services and contributions to the company. These benefits could be a service, products, or in cash. 

Any fringe benefits received by a citizen, resident alien or non-resident alien engaged in trade or business within the Philippines are subject to a thirty-five percent (35%) and twenty-five percent (25%) to any fringe benefits received by a non-resident alien not engaged in trade or business within the Philippines.

Other incomes subject to Withholding Tax Train Law

  1. Income paid to a resident foreign corporation.
  2. Revenues derived from all sources within the Philippine by a non-resident foreign corporation.
  3. Informer’s reward to persons instrumental in the discovery of violations of the NIRC and the exploration and seizure of smuggled goods.

Withholding Tax Table Train Law

REVISED WITHHOLDING TAX TABLE      
Effective January 1, 2018 to December 31, 2022
DAILY123456
Compensation RangeP685 and belowP685 -P1,095P1,096 - P2,191P2,192 - P5,478P5,479 - P21,917P21,918 and above
Prescribed Withholding Tax00.00 +20% over P685P82.19 +25% over P1,096P356.16 +30% over P2,192P1,342.47 +32% over P5,479P6,602.74 +35% over P21,918
WEEKLY123456
Compensation RangeP4,808 and belowP4,808 - P7,691P7,692 - P15,384P15,385 - P38,461P38,462 - P153,845P153,846 and above
Prescribed Withholding Tax00.00 +20% over P4,808P576.92 +25% over p7,692P2,500.00 +30% over p15,385P9,423.08 +32% over P38,462P46,346.15 +35% over P153,846
SEMI-MONTHLY123456
Compensation RangeP10,417 and belowP10,417 - P16,666P16,667 - P33,332P33,333 - P83,332P83,333 - P333,332P333,333 and above
Prescribed Withholding Tax00.00 +20% over P10,417P1,250.00 +25% over P16,667P5,416.67 +30% over P33,333P20,416.67 +32% over P83,333P100,416.67 +35% over P333,333
MONTHLY123456
Compensation RangeP20,833 and belowP20,833 - P33,332P33,333 - P66,666P66,667 - P166,666P166,667 - P666,666P666,667 and above
Prescribed Withholding Tax00.00 +20% over P20,833P2,500.00 +25% over 33,333P10,833.33 +30% over P66,667P40,833.33 +32% over P166,667P200,833.33 +35% over P666,667
 REVISED WITHHOLDING TAX TABLE
Effective January 1, 2023 and onwards
DAILY123456
Compensation RangeP685 and belowP685 -P1,095P1,096 - P2,191P2,192 - P5,478P5,479 - P21,917P21,918 and above
Prescribed Withholding Tax00.00 +15% over P685P82.19 +20% over P1,096P356.16 +25% over P2,192P1,342.47 +30% over P5,479P6,602.74 +35% over P21,918
WEEKLY123456
Compensation RangeP4,808 and belowP4,808 - P7,691P7,692 - P15,384P15,385 - P38,461P38,462 - P153,845P153,846 and above

How to compute withholding tax under train law?

After learning the updates regarding withholding tax train law 2018 we must know also how to compute withholding tax under train law. Do you want to know how to do it? Are you practicing your profession or employed? If you want to know the estimated withholding tax from your employer, make sure you have your payslip before you proceed to the next instructions. 

To know your withholding tax this month,  read this article: 5 Steps on How to Use Tax Calculator 2018

Conclusions

Not all incomes earned are subject to withholding tax under the new tax reform. Only those incomes are not subject to the income tax rate. You read also the changes in withholding tax rate because of the implementation of train law. You may be interested to learn the latest BIR issuance 2019.  Read the full article regarding updates about the income tax in the Philippines.

What else do you want to know about withholding tax train law? Please drop your comments so we can help you. Make sure to rate this article and share it before closing it.

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