The Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 50-2018 clarifying certain provisions of Revenue Regulations (RR) Nos. 8-2018 and 11-2018 implementing the income tax provisions, including its consequent withholding tax, of Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Act.
Here are some of the notable items highlighted by Navarro Amper & Co DTTL in their Tax in a Dot series:
Tax treatment of de minimis in excess of prescribed threshold
The benefits given in excess of the maximum amount allowed as de minimis benefits shall be included as part of “other benefits,” which is subject to the P90,000 ceiling. Any amount in excess of the P90,000 shall be subject to income tax, and consequently, to withholding tax on compensation.
Incentives given to employees
In general, any incentive given to employees shall form part of the compensation subject to income tax, unless specifically exempted under a special law or unless the incentives are in the nature of the previously enumerated de minimis benefits.
Premium on health card
- Premium on health card paid by the employer for all employees, whether rank-and-file or managerial/supervisory, under a group insurance shall be included as part of “other benefits,” which are subject to P90,000 threshold.
- Individual premiums (not part of group insurance) paid for selected employees holding managerial or supervisory functions are considered fringe benefits subject to fringe benefits tax.
Receipt of other income of an MWE
The minimum wage employee (MWE) is exempt when it comes to their statutory minimum wage (SWM), holiday pay, overtime pay, hazard pay, and night shift differential pay. Income other than these will be taxable, which is computed by deducting the nontaxable/exempt portion and other deductions from gross compensation income. The resulting taxable income shall be multiplied to the applicable tax rate under the graduated rates.
Presentation of compensation exempt from tax under the TRAIN Law in BIR Form 1601C
Compensation exempt from tax under the TRAIN Law shall be part of nontaxable compensation in BIR Form 1601C. There is also no need to segregate the same from the schedule of MWEs since their compensation is nontaxable.
Failure to signify election of 8% tax
- An individual taxpayer who qualifies for the 8% income tax rate but who fails to signify their intention to avail of the same will be subject to graduated income tax rates.
- Election of 8% income tax rate for existing taxpayers shall be made by filing BIR Form 1905 (Application for Registration Update), 1st Quarterly Percentage Tax Return, and/or 1st Quarterly Income Tax Return.
- Election of 8% income tax rate for new taxpayers shall be made by filing BIR Form 1901 (Application for Registration) or initial Quarterly Percentage/Income Tax Return.
Treatment of returnable deposits or deposits held in trust
- Generally, all deposits received are included in the definition of gross receipts under Section 2(g) of RR 8-2018. However, returnable deposits or deposits held in trust recorded as liabilities are excluded.
Annex B-2 submitted to payor after deadline of 20 April 2018
- The payee’s excess tax withheld, if any, prior to the approval of RR 11-2018, shall not be refunded by the income payor. The payee’s executed sworn declaration shall be applied by the withholding agent on all income payments after receipt of such declaration.
- Annex B-2 of RR 11-2018 pertains to Income Payee’s Sworn Declaration of Gross Receipts/Sales (For Self-Employed and/or Engaged in the Practice of Profession with Lone Income Payor).
Treatment of remitted withholding taxes using old BIR Forms 1601E and 1601F and BIR Form 0605 for the first two months of the quarter
The payments shall be deducted from the taxes due to be remitted for the entire quarter.
Filing of withholding tax returns of eFPS taxpayers
eFPS taxpayers shall follow the staggered filing of withholding tax returns based on industry grouping.