On December 19, 2017, President Rodrigo Duterte enacted into law the Republic Act no. 10963, otherwise known as the Tax Reform for Acceleration and Inclusion or the TRAIN law as it is commonly referred to in daily parlance. With the advent of this bill's signing into law, the government aims to address the decades long inequity in the taxation policies from past administrations that hurt the poor and the middle class. Personal income tax was diminished and in some cases, even completely removed.
Naturally, as comes with every bit of change, there is a corresponding need to adjust our older ways and adapt to changing times. From the broad perspective of running a company and managing employee payroll, the new taxation policies effected by the government would mean drastic changes in the manner in which computations are made in terms of employee deductions and contributions. The government is not amiss in providing tabular presentations of these new rates and deductions for various income brackets, and of course, so is Sprout.
Below is a table showing the new matrix for computing withholding tax:
The preceding table is available for viewing on Sprout Payroll through the Setup tab, under References. Click on Tax Table, and you will be able to see this. The computation of the deductible tax depends on whether an employee is paid daily, weekly, semimonthly, or monthly. It is given by the following formula:
Taxable Income = Taxable Earnings  Nontaxable Deductions
Taxable Earnings include the following:
>> Basic Pay + Overtime Pay + Night Differential  Late and Undertime  Absences + Taxable Allowances +/ Salary Adjustments
(largely, the Taxable Earnings refer to one's gross salary, except that it doesn't include the deductions)
Nontaxable Deductions are comprised of the following:
>>SSS contribution + PhilHealth contribution + PagIBIG contribution (the mandatory amount only for HDMF contribution)
Once the taxable income is already known, you can now compute the withholding tax based on the table above.
TAX COMPUTATION FOR VARIOUS PAYOUT TYPES
Let's now do some sample computations of Tax deductions for each of the different kinds of payouts. First, let's try doing the computation for daily wage earners. For instance, the employee’s daily taxable earnings for the payroll period is P2,500.00. The nontaxable deductions, for instance, would be SSS (P90.80), Philhealth (P68.75), and HDMF (P100.00). Hence, the total nontaxable deductions will be P259.55.
Basing on the general formula given above, taxable earnings of P2,500 less nontaxable deductions of P259.55 results to a taxable income of P2,240.45. Now, based on the new tax table under daily wages, the compensation range will be covered by column number 4 (the P2,192.00  P5,478.00 range).
This is where it may get a little tricky. The taxable income of P2,240.45 will be deducted by the lower end of the compensation range, that is, P2,192.00. The result is P48.45. This excess amount of P48.45 will be multiplied by 30% tax rate and added to the standard P356.16 as indicated in the table. Thus, the withholding tax to be deducted from the employee shall be P370.69 (P356.16 + [P48.45 x 0.30]). Please refer to the illustration below for daily wage tax deduction:
Withholding Tax shall be computed as follows:
Total Taxable Compensation 
P 2,240.45 
Less: Compensation Range under Column 4 
P 2,192.00 
Excess 
P 48.45 x 0.30 P 14.54 
Fixed Amount  30% Percentage Tax 
P 356.16 
Tax on excess (P48.45 x 30%) 
P 14.54 
Total daily withholding tax 
P 370.69 
Now let's move on to the computation for weekly wage earners. For instance, employee’s weekly taxable earnings for the payroll period is P10,000.00. The nontaxable deductions would amount to the following: SSS (P363.30), Philhealth (P125.00), and HDMF (P100.00). Hence, the total for nontaxable deductions will be P588.30.
We revert to the formula from above to compute for the withholding tax. Taxable earnings of P10,000.00 less nontaxable deductions of P588.30 results to P9,411.70. Now, based on the new tax table under weekly wages, the compensation range will be covered by column number 3. The taxable income of P9,411.70 deducted by the lower end of the compensation range given by the amount P7,692.00 results to P1,719.70. This excess amount of P1,719.70 will again be multiplied by 25% tax rate and added to the standard value P576.92 as provided by the table. Thus, the withholding tax to be deducted to the employee shall be P1,006.85 (P576.92 + [P1,719.70 x 0.25]). Please refer to the illustration below for weekly wage computations:
Withholding Tax shall be computed as follows:
Total Taxable Compensation 
P 9,411.70 
Less: Compensation Range under Column 3 
P 7,692.00 
Excess 
P 1,719.70 x 0.25 P 429.93 
Tax on P7,692.00 
P 576.92 
Tax on excess (P1,719.70 x 25%) 
P 429.93 
Total weekly withholding tax 
P 1,006.85 
This time, let's try solving for the standard semimonthly payout. Let's say an employee’s semimonthly basic salary is P10,000, plus overtime amount of P1,000 less absences of P500 and additional salary adjustment amounting to P500. This would amount to total taxable earnings for the payroll period of P11,000.00. The nontaxable deductions, on the other hand, would be SSS (P290.65), Philhealth (P137.50), and HDMF (P50.00). Hence, the total for nontaxable deductions will be P478.15.
Based on the table above, taxable earnings of P11,000.00 less nontaxable deductions of P478.15 taxable income will be P10,521.85. Now, based on the new tax table under semimonthly, the compensation range will be covered by column number 2. The taxable income of P10,521.85 less the lower end of the compensation range, that is P10,417.00. This results to P104.85. This excess amount of P104.85 will be multiplied by 20% tax rate, not adding it to anything this time (as per the table). Thus, the withholding tax to be deducted from the employee shall be P20.97 (P104.85 x0.20). Please refer to the illustration below for semimonthly:
Withholding Tax shall be computed as follows:
Total Taxable Compensation 
P 10,521.85 
Less: Compensation Range under Column 2 
P 10,417.00 
Excess 
P 104.85 x 0.20 20.97 
Tax on P10,417.00 
P 0.00 
Tax on excess (P104.85 x 20%) 
P 20.97 
Total semimonthly withholding tax 
P 20.97 
Lastly, let's try computing for the tax deduction for monthly wage earners. Let's project that the employee’s monthly taxable earnings for the payroll period are P100,000.00. The nontaxable deductions would be SSS (P581.30), Philhealth (P550.00), and HDMF (P100.00). Hence, the total for nontaxable deductions will amount to P1,231.30.
Still based on our main formula above, taxable earnings of P100,000.00 less the nontaxable deductions of P1,231.30 will result to a taxable income of P98,768.70. Based on the new tax table under monthly wages, the compensation range is covered by column number 4. Taxable income of P98,768.70 less the lower end of the compensation range of P66,667.00 will result to P32,101.70. This excess amount of P32,101.70 will be multiplied by 30% tax rate and then added to a standard P10,833.33 as provided by the table. Thus, the withholding tax to be deducted from the employee shall be P20,463.84 (P10,833.33 + [P32,101.70 x 0.30]). Please refer to the illustration below for monthly:
Withholding Tax shall be computed as follows:
Total Taxable Compensation
P 98,768.70 

Less: Compensation Range under Column 4 
P 66,667.00 
Excess 
P 32,101.70 x 0.30 P 9,630.51 
Tax on P66,667.00 
P 10,833.33 
Tax on excess (P32,101.70 x 30%) 
P 9,630.51 
Total monthly withholding tax 
P 20,463.84 
Well, that was quite longwinded, but it is important to know how to compute for these things, especially for those at the forefront of payroll services. At any rate, the tax computation table is available via Sprout Payroll to provide a reference for those who need it, and those who may occasionally find the need to quench their curiosity as to how tax deductions are computed for their payout. At best, this article can only serve as a template and guide as to how the computations are done, and doing them on one's own is all in all a different experience  perhaps, an experience we should have at least once, and an experience we can keep right up our sleeves.
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