THE WITHHOLDING TAX IS NOT THE INCOME TAX.

Hello everyone!

I been talking to some of my friends about the taxes deducted from their income and they were kind of confuse. They thought Withholding Tax is Income Tax. Although... in such a way they are related because Withholding Tax (WT) is the advance payment of the Income Tax. 

There are Four Types of Withholding Taxes and these are as follows:

      1) Withholding Tax on Compensation

      2) Expanded Withholding Tax (also called Creditable Withholding Tax)

      3) Final Withholding Tax 

      4) Withholding Tax on Government Money Payment

 

The employers are designated as withholding agents and required to deduct tax from the employees.

Likewise, the BIR had also constituted and required the following persons to withhold tax as stated in SECTION 2.57.3 of Revenue Regulations (RR) No. 2-1998:

      (A) In general, any juridical person, whether or not engaged in trade or business;

      (B) An individual, with respect to payments made in connection with his trade or business. However, insofar as taxable sale, exchange or transfer of real property is concerned, individual buyers who are not engaged in trade or business are also constituted as withholding agents;

      (C) All government offices including government-owned or controlled corporations, as well as provincial, city and municipal governments. 

For the computation of Withholding Tax on Compensation, the employers use the Withholding Tax Tables while the rest of the types of WT are based on specific rates provided in the regulations issued by the BIR. The updated rates for the Expanded Withholding Tax and Final Tax are available in RR No. 17 and 30, 2003 and for the Withholding Tax on Government Money Payment, I will refer you to  Annex A of Revenue Memorandum Circular (RMC) No. 56-2009.

  

Whereas, in the Income Tax computation, we use the following rates in accordance with Section 24 of the Tax Code, thus:

The tax shall be computed in accordance with and at the rates established in the following schedule:

Not over P10,000………………………………… 5%

Over P10,000 but not over P30,000……………… P500+10% of the excess over P10,000

Over P30,000 but not over P70,000……………… P2,500+15% of the excess over P30,000

Over P70,000 but not over P140,000……..……… P8,500+20% of the excess over P70,000

Over P140,000 but not over P250,000………..... P22,500+25% of the excess over P140,000

Over P250,000 but not over P500,000………… P50,000+30% of the excess over P250,000

Over P500,000 …………………………………… P125,000+34% of the excess over P500,000 in 1998.

Provided, That effective January 1, 1999, the top marginal rate shall be thirty-three percent (33%) and effective January 1, 2000, the said rate shall be thirty-two percent (32%).

 Well, I hope I have provided you with valuable information.

Good day and God bless us as always!