When you received your salary last January 15 or 30, have you ever wondered why does it seems to be higher than your usual take-home pay? In case you are still unaware, you are one of the 99% of Filipino employees or workers who are benefiting the Philippine Tax Reform this 2018.
It is not that your salary increased, unless you received a notice beforehand. Well, it looks like it but it’s actually not. The reason you received an additional take-home pay is because you are either exempted in paying an individual income tax or paying much lower tax than the past year. This is due to the Republic Act No. 10963, known as the Tax Reform for Acceleration and Inclusion (TRAIN) Law, which took effect on January 1, 2018.
One of the aims of the TRAIN Law to lessen the income tax burden of the majority of Filipinos who are poor and those who belongs in the middle class. Employees who are receiving annual salary not more than ₱250,000 are now exempted in income tax. In other words, if you are earning not more than ₱20,833.33 per month, you are exempted in paying for an income tax. Thus, it serves as your additional take-home pay.
Brief Example
Last year, if you are earning ₱20,000 per month, most likely, you have a net take-home pay worth ₱16,384.86. These are the usual deductions:
- Income Tax – ₱2,683.84
- SSS – ₱581.30
- PhilHealth – ₱250.00 (last year contribution rate, now is ₱275)
- Pag-IBIG – ₱100.00
The total deductions would be ₱3,615.14. Thus, the salary you’ll receive and use to sustain you and your family for a month is ₱16,384.86 (calculated as ₱20,000 – ₱3,615.14).
However, with the implementation of TRAIN Law, you are exempted in paying tax since your monthly salary is not over ₱20,833.33. This means that your income tax worth ₱2,683.84 shall not be withheld by your employer anymore. You’ll receive that amount as an additional take-home pay or tax savings.
Learn more about the new tax rates, go to: New Tax Table 2018.
In this year 2018 – 2022 (if there are no changes), if your salary is still ₱20,000 per month, your net take-home pay will not be ₱16,384.86 anymore. Since you are exempted in income tax, the deductions of your salary shall only be your contributions in SSS (₱581.30), PhilHealth (₱275) and Pag-IBIG (₱100) which the total amount is ₱956.30.
So ₱20,000 per month – ₱956.30 deduction form contributions, your new monthly net take-home pay this 2018 would be ₱19,043.70 which is previously ₱16,384.86. This means that you have an additional take home pay or tax savings worth ₱2,683.84.
This seems to be wrong right? When you subtract ₱19,043.70 – ₱16,384.86, it is equal to ₱2,658.84 and not ₱2,683.84 which lacks ₱25. The lacking ₱25 is due to the increase in new PhilHealth Contribution.
Under the TRAIN Law, tax exemption cap on 13th month pay is set to ₱90,000 from the previous ₱82,000.
Below is a table showing the monthly salary and the corresponding old income tax rate 2017, the new income tax rate 2018 and the additional take-home pay for employees. You can compare the amount of money most of the employees save from the low tax rates.
Additional Take Home Pay for Employees under Philippine Tax Reform 2018
| Monthly Salary | Income Tax 2017 | Income Tax 2018 | Additional Take-Home Pay |
|---|---|---|---|
| ₱10,000 | ₱620.09 | ₱0.00 | ₱620.09 |
| ₱15,000 | ₱1,541.83 | ₱0.00 | ₱1,541.83 |
| ₱20,000 | ₱2,683.84 | ₱0.00 | ₱2,683.84 |
| ₱25,000 | ₱3,918.22 | ₱628.32 | ₱3,289.90 |
| ₱30,000 | ₱5,353.53 | ₱1,614.57 | ₱3,738.96 |
| ₱35,000 | ₱6,853.53 | ₱2,626.03 | ₱4,227.50 |
| ₱40,000 | ₱8,331.03 | ₱3,858.84 | ₱4,472.19 |
| ₱45,000 | ₱9,831.03 | ₱5,108.84 | ₱4,722.19 |
| ₱50,000 | ₱11,391.98 | ₱6,358.84 | ₱5,033.14 |
| ₱55,000 | ₱12,991.98 | ₱7,608.84 | ₱5,383.14 |
| ₱60,000 | ₱14,591.98 | ₱8,858.84 | ₱5,733.14 |
| ₱65,000 | ₱16,191.98 | ₱10,108.84 | ₱6,083.14 |
| ₱70,000 | ₱17,791.98 | ₱11,463.94 | ₱6,328.04 |
| ₱75,000 | ₱19,391.98 | ₱12,963.94 | ₱6,428.04 |
| ₱80,000 | ₱20,991.98 | ₱14,463.94 | ₱6,528.04 |
| ₱85,000 | ₱22,671.98 | ₱15,963.94 | ₱6,708.04 |
| ₱90,000 | ₱24,405.32 | ₱17,463.94 | ₱6,941.38 |
| ₱95,000 | ₱26,138.65 | ₱19,088.94 | ₱7,049.71 |
| ₱100,000 | ₱27,871.98 | ₱20,713.94 | ₱7,158.04 |
| ₱110,000 | ₱31,338.65 | ₱23,963.94 | ₱7,374.71 |
| ₱120,000 | ₱34,805.32 | ₱27,213.94 | ₱7,591.38 |
| ₱130,000 | ₱38,271.98 | ₱30,463.94 | ₱7,808.04 |
| ₱140,000 | ₱41,738.65 | ₱33,713.94 | ₱8,024.71 |
| ₱150,000 | ₱45,205.32 | ₱36,963.94 | ₱8,241.38 |
| ₱160,000 | ₱48,671.98 | ₱40,213.94 | ₱8,458.04 |
| ₱170,000 | ₱52,138.65 | ₱43,639.32 | ₱8,499.33 |
| ₱180,000 | ₱55,605.32 | ₱47,105.98 | ₱8,499.34 |
| ₱190,000 | ₱59,071.98 | ₱50,572.65 | ₱8,499.33 |
| ₱200,000 | ₱62,538.65 | ₱54,039.32 | ₱8,499.33 |
In your case, look for the monthly salary closest to the amount you are receiving. Then from there, you can probably estimate the income tax and additional take-home pay you are receiving starting January.
Moreover, if you want to know the exact amount of your income tax and additional take home pay, go to: How to Compute Income Tax Under TRAIN Law.
Should you have any additional useful information or tips about the additional take-home pay for employees under the Philippine Tax Reform 2018, do let us know in the comment section. If you found this article helpful, please share.
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