Compensation and Benefits Tax Issues and Solutions in Atty. Villanueva’s New Title Tax Solutions On Employee Compensation and Benefits
Compensation and benefits (comp-ben) are among the challenging tasks of every HR/Labor practitioner inside the company.
Along with the mandate are tax issues that should be resolved. The so-called Goldilocks zone in comp-ben is when the net take home of the employee is maximized. This means that he gets more cash and less tax.
What is the solution?
The solutions are found in the newly released comp-ben tax title of Atty. Villanueva. The book Tax Solutions on Employee Compensation and Benefits 2nd Edition 2019 has been launched in all National Book Store branches nationwide. It can also be purchased online.
The following are the topics discussed in the book which may improve every company’s tax savings efforts:
BASIC TAXATION PRINCIPLES
- The power to tax
A.1 Limitations on the power to tax
INCOME TAX
- Definition of Income
- Taxability of Income
B.1 Requisites for taxability
- Individual as taxpayer
C.1 Tax on an employee under the TRAIN Law
C.1.1 Tax rules governing employees
C.1.2 Employee as resident citizen
C.2 Tax rates
C.2.1 Basis of computation of wages
C.3 Withholding of tax on compensation income
C.3.1 Not qualified for substituted filing
C.3.2 Frequency of payment of wages
C.3.4 Suggested formula in obtaining equivalent monthly rate
C.4 Basic rules on withholding
C.4.1 Exemption from withholding tax on compensation
C.4.2 Withholding tax table under TRAIN law
C.5 How to determine the amount to be withheld using the withholding tax table
C.6 Illustration
MAXIMIZING TAX SAVINGS UNDER THE TRAIN LAW
- NON-TAXABLE LIMIT UNDER THE TRAIN LAW
- GRANTING AN ALLOWANCE
13TH MONTH PAY AND OTHER BENEFITS
- REVISED CEILING OF 13TH MONTH PAY AND OTHER BENEFITS
A.1 Coverage of 13th month pay
A.2 Exclusion from the benefit
A.2.1 Meaning of “its equivalent”
A.3 Illustration
DE MINIMIS BENEFITS
- MEANING OF DE MINIMIS BENEFITS (DMB)
A.1 Amended list
A.2 Sample annual values of DMB
A.3 Illustrating the effect of DMB beyond the non-taxable range of WT table
TAX TREATMENT
ON NEWLY HIRED EMPLOYEES WITH PREVIOUS EMPLOYER
- Cumulative average method
A.1 Use of cumulative average method
- Applying average cumulative method to newly hired employee with previous employer within the calendar year
TAX TREATMENT
ON EMPLOYEE TERMINATED BEFORE THE END OF CALENDAR YEAR
- Annualized Withholding Tax Method
A.1 Treatment of deficiency or excess
A.2 Illustration of annualized computation
A.3 Illustration of Year-End Adjustments
A.4 Withholding tax on compensation of employees other than rank-and-file
FRINGE BENEFITS
- NEW RATES ON FRINGE BENEFITS
A.1 Fringe benefit tax is payable by employer
A.2 Fringe benefits rates for local and alien employees
A.3 Grossed-up monetary value (GMV) of benefit
A.4 Certain fringe benefits
A.4.1 Non-taxable fringe benefits
A.5 Illustration of grant of fringe benefits
- DETERMINATION OF THE AMOUNT SUBJECT TO THE FRINGE BENEFIT TAX
B.1 Value of fringe benefits
B.2 Housing privilege to company directors who received fixed salaries as company officers taken from retained earnings
B.3 Ruling on housing allowance
B.4 Treatment of car plan for managers and executives
B.5 Leased car used for official and personal purposes
B.6 Case of car maintenance allowance
B.7 Fringe benefit ruled as for convenience of employer
B.8 Tax accounting for the fringe benefit furnished to the employee and the fringe benefit tax due thereon
B.9 Tax credit (TCC) cannot be used against the FBT liability of employer
B.10 Tax accounting of fringe benefits
RETURNS AND PAYMENT OF TAXES WITHHELD AT SOURCE
- MANNER, VENUE AND TIME OF FILING OF WITHHOLDING TAX RETURNS AND PAYMENT OF TAXES WITHHELD AT SOURCE
- WITHHOLDING TAX STATEMENT FOR TAXES WITHHELD
- ANNUAL INFORMATION RETURN AND ANNUAL ALPHABETICAL LIST OF PAYEES FOR INCOME TAX WITHHELD AT SOURCE
REGISTRATION AND OTHER RULES ON WITHHOLDING
- APPLICATION FOR REGISTRATION FOR INDIVIDUALS EARNING COMPENSATION INCOME (BIR FORM NO. 1902)
- CURRENT MULTIPLE EMPLOYMENTS
- SUCCESSIVE MULTIPLE EMPLOYMENT
- PROCEDURES FOR THE FILING OF THE APPLICATION FOR REGISTRATION (BIR FORM NO. 1902) AND/OR APPLICATION FOR REGISTRATION INFORMATION UPDATE (BIR FORM NO. 1905)
- EMPLOYEES WITHHOLDING STATEMENTS (BIR FORM 2316)
- SUBSTITUTED FILING OF INCOME TAX RETURNS BY EMPLOYEES RECEIVING PURELY COMPENSATION INCOME
F.1 Return for Individuals Earning Purely Compensation Income (BIR Form No. 1700)
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