BAINCTAX

Income Taxation
1TAY2022

Regular Income Taxation

Compensation
Income
 TYPES OF EMPLOYEES
It is to be noted that one should know where an employee is classified as there are different tax rules for each classification.

Those who are given powers or prerogatives to lay down and execute managerial policies
Managerial and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline
employees.
As to Function Those who effectively recommend such managerial actions if the exercise of such
Supervisory authority is not merely routinary or clerical in nature but requires the use of independent
judgment.
Rank-and-file Those who hold neither managerial nor supervisory functions.
Minimum Wage Employees who are recipients of minimum wage. They are exempt from income tax on
As to Taxability Earners (MWEs) their compensation.
Regular Employees who are subject to the regular progressive income tax.
Private Those who are employed in the private sector. They normally pays the SSS Contributions.
Those who are employed by any government body including its political subdivisions.
As to Employer
Government This employee normally pays the GSIS Contributions. Their basic pay is normally based
on salary grades.

Regular Income Taxation Compensation Income page 1

 TAX MODEL ON COMPENSATION INCOME
Let us look at a portion of BIR Form 2316 to see the tax model on compensation income.

Let us assume that there is only one employer connected with employee and no other sources income on his part during the
taxable year. We can further simplify the tax model as:

Gross Compensation Income xx

Non-Taxable Compensation Income (xx)
Taxable Compensation Income xx

Tax Due xx
Tax Withheld (xx)
Tax Payable xx

Regular Income Taxation Compensation Income page 2

 Remember that purely employed individuals may
qualify for the substituted filing of income tax
return. This is because normally, its employer
annualizes all its taxable compensation income and
this would result to a nil amount of tax still due.

To illustrate the flow of the topics in this module and

how it relates to the tax model. You may look at the
diagram below.

Firstly, we will determine those items which are

non-taxable for us to only consider those taxable
items later on. We will then work our way up to
compute for the taxable compensation income.

Regular Income Taxation Compensation Income page 3

 EXEMPT COMPENSATION INCOME
The following are the items of exempt compensation income when referring to Form 2316.

This includes the P250,000 exemption threshold which is the first bracket in the progressive tax
table. This should also include the Statutory Minimum Wage of a minimum wage earner.
Basic Salary
It should be noted, however, that if the taxable regular and supplementary compensation is less
than P250,000, the actual amount will be added in lieu of the P250,000.
Supplementary This would include Holiday Pay, Overtime Pay, Night Shift Differential pay and Hazard Pay.
Compensation of MWE
13th Month Pay and As provided by the tax code, the first P90,000 is exempt, any excess over this amount is part of
Other Benefits Supplementary Compensation. The composition of this item will be discussed later.
This would include petty benefits which are within the limits provided. This is further discussed
De Minimis Benefits
later in this module.
Employee Share on the mandatory contributions to SSS, GSIS, PHIC and HDMF are non-taxable.
Mandatory Contributions
The same goes to union dues.
Salaries and Other Forms This is the catch-all basin for all other exempt benefits as provided by tax and special laws. These
of Compensation are, but not limited to, the following:

Regular Income Taxation Compensation Income page 4

 a. Exempt retirement benefits under RA 7641 including exempt retirement gratuities to
government officials and employees
b. Exempt termination benefits
c. Benefits from the United States Veterans Administration
d. Social security, retirement gratuities, pensions, and similar benefits from foreign government
agencies and other institutions, private or public
e. Benefits from SSS, under the SSS Act of 1954, as amended f. Benefits from GSIS under the
GSIS Act of 1937, as amended
f. Personal Economic Relief Allowance of government employees
g. Benefits exempt under treaty or international agreements
h. Benefits necessary to the trade, business, or conduct of profession of the employer
i. Benefits for the convenience or advantage of the employer

DE MINIMIS BENEFITS
De minimis benefits are facilities or privileges such as entertainment, medical services, or courtesy discounts on purchases that
are of relatively small value and are furnished by the employer merely as a means of promoting the health, goodwill,
contentment, or efficiency of his employees. De minimis benefits are petty fringe benefits exempt from income tax. As originally
conceived, other petty fringe benefits which fall within the purview of de minimis even if not part of the de minimis list are
Regular Income Taxation Compensation Income page 5
 normally treated as de minimis and are also exempt from income tax. However, the BIR and the Department of Finance changed
the rule wherein the term "de minimis benefits" was restricted to mean only the following:
De Minimis Benefit Limit
Monetized unused vacation leave credits of private employees 10 days per year
Monetized unused vacation and sick leave credits of government employees -no limit-
Medical Cash allowance to dependents P1,500 per semester
Rice subsidy P2,000 per month
Uniform and Clothing Allowance P6,000 per year
Actual Medical Assistance P10,000 per year
Laundry Allowance P300 per month
Employee Achievement Award, in the form of non-cash tangible property P10,000 per year
Christmas and Anniversary gifts P5,000 per year
Daily meal allowance for overtime work and night or graveyard shift 25% of minimum wage
Benefits received under Collective Negotiation Agreement/Collective Bargaining Agreement and
P10,000 per year
Productivity Enhancement Incentive schemes

Regular Income Taxation Compensation Income page 6

 Take note that if the benefits received under CNA/CBA and PEI schemes which exceed P10,000 shall be fully considered as
excess de minimis.

Excess De Minimis Benefits

Amounts in excess of these regulatory limits are called excess de minimis benefits.

Taxable De Minimis Benefits

This includes the excess de minimis benefits and other benefits of relatively small value that not included in the list of de minimis
benefits under RR 11-2018.
Treatment
The table below summarizes the treatment for the taxable de minimis benefits basing on the type of employee as to their function.
Function Treatment
Managerial or Supervisory Subject to Fringe Benefit Tax (Final Tax)
Rank-and-File Part of 13th Month Pay and Other Benefits

Since those taxable de minimis benefits earned by employees occupying managerial or supervisory functions is subject to FBT
which is a form of final tax, such is not reported in the Form 2316.

Regular Income Taxation Compensation Income page 7

 Illustration 9.1 DE MINIMIS BENEFIS
Lula is paid at a P750 daily rate. In addition to the basic pay, she received the following during the year.
Monetized unused vacation days 11 days
Monetized unused sick days 8 days
Medical cash allowance to dependents P1,000 per quarter
Rice subsidy P2,200 per month
Uniform allowance P5,000
Medical allowance for healthcare needs of Lula P8,500
Laundry allowance P350 per month
Cash Achievement Award P5,000
Anniversary Gift P6,000
Collective bargaining agreement benefits P10,000
Scenario 1: Lula is a private employee. Scenario 2: Lula is a government employee.
Actual Limit Excess Actual Limit Excess
Monetized unused VL 8,250 7,500 750 Monetized unused VL 8,250 Unlimited -
Monetized unused SL 6,000 - 6,000 Monetized unused sick days 6,000 Unlimited -
Medical cash allowance 4,000 3,000 1,000 Medical cash allowance 4,000 3,000 1,000
Rice subsidy 26,400 24,000 2,400 Rice subsidy 26,400 24,000 2,400

Regular Income Taxation Compensation Income page 8

 Uniform allowance 5,000 6,000 - Uniform allowance 5,000 6,000 -
Medical allowance 8,500 10,000 - Medical allowance 8,500 10,000 -
Laundry allowance 4,200 3,600 600 Laundry allowance 4,200 3,600 600
Cash Achievement Award 5,000 - 5,000 Cash Achievement Award 5,000 - 5,000
Anniversary Gift 6,000 5,000 1,000 Anniversary Gift 6,000 5,000 1,000
CBA benefits 10,000 10,000 - CBA benefits 10,000 10,000 -
Total 83,350 16,750 Total 83,350 10,000
The amount of P66,600 (P83,350-P16,750) for Scenario 1 and P73,350 (P83,350-P10,000) for Scenario 2 will be exempt as these
are within the limits. It will be reflected on item 33 on Form 2316.The taxable de minimis benefits computed in both scenarios
will be part of 13th Month Pay and Other Benefits if Lula is a rank-and-file employee or subject to Fringe Benefit Tax if she
holds either managerial or supervisory position.

13TH MONTH PAY AND OTHER BENEFITS

The following are the items of this category.

1. 13th month pay, 14th month pay, 15th month pay, etc.
2. Christmas bonus of private employees
3. Cash gifts other than Christmas or Anniversary gifts of private employees

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 4. Additional Compensation Allowance (ACA) of government employees
5. Other fringe benefits of rank-and-file employees
a. Taxable de minimis benefits
b. Personal expenses shouldered by the employer

The exemption threshold of the aggregate amount of these items is P90,000. This means that that first P90,000 is exempt and any
excess is added as part of Supplementary Compensation reported in item 46 under Form 2316.
Illustration 9.2 13TH MONTH PAY AND OTHER BENEFITS
Luna received the following benefits during the year:
13th Month Pay 30,000
14th Month Pay 30,000
Excess de minimis benefits 25,000
Personal expenses reimbursed by the company 10,000
Christmas Gift 5,000
The taxable 13th MP&OB shall be computed as follows:
Private R&F Private M/S Gov’t R&F` Gov’t M/S
13th Month Pay 30,000 30,000 30,000 30,000
14th Month Pay 30,000 30,000 30,000 30,000

Regular Income Taxation Compensation Income page 10

 Excess de minimis benefits 25,000 - 25,000 -
Personal expenses reimbursed by the company 10,000 - 10,000 -
Christmas Gift - - 5,000 5,000
Total 95,000 60,000 100,000 65,000
Exemption Threshold 90,000 90,000 90,000 90,000
Taxable 13th Month Pay and Other Benefits 5,000 - 10,000 -

SUPPLEMENTARY COMPENSATION
These are additional compensation which are performance-based remunerations. These are given with or without regard to the
payroll period. The following are the items of supplementary compensation.

Overtime, Holiday, These constitute additional compensation, except when derived by a minimum earner.
Hazard, and Night
Differential Pay
Taxable 13th Month This is the excess of the 13th MP&OB over the P90,000 exemption threshold.
Pay and Other
Benefits

Regular Income Taxation Compensation Income page 11

 Commissions, Commissions are incentives intended to stimulate sales. These may be given as a profit sharing or
Emoluments, performance bonus. Emoluments pertain to any pay in general while honoraria are additional
Honoraria payments for attending to special tasks or assignments.
If an employee receives free living quarters or meals in addition to salary for services rendered, the
Living Quarters or value to the employee of such living quarters or meals is included in compensation income. However,
Meals when the same was furnished to an employee for the convenience of the employer or out of necessity
of the employer's business, the value thereof is not compensation income, but a business expense.
Under various stock option plans, employees are given the privilege to buy shares at an agreed exercise
price after meeting stipulated vesting conditions. The option will have value when the stock of the
Stock Option Plans
employer increases in value above the exercise price at exercise date. The value of the option is the
discount at exercise date.
Fees are received by an employee for the services rendered to the employer including a director's fee
of the company; fees paid to the public officials, such as clerks of court or sheriffs for services rendered
in the performance of their official duty over and above their regular salaries. •
Fees
Legal fees paid by a union on behalf of its president constitute compensation. Marriage fees, baptismal
offerings, sums paid for conducting masses for the dead, and other contributions received by a
clergyman, evangelist, or religious worker for services rendered are considered compensation.

Regular Income Taxation Compensation Income page 12

 Taxable Retirement Those which did not meet requisites for exemption are taxable as supplementary compensation.
and Separation Pay
Profit sharing is a reward for churning the business to post a profit. It is a compensation for controlling
all the factors that influence profit such as marketing and sales, productivity, and administrative
Profit Sharing or factors. It is a reward which can be enjoyed by individual employees such as salesmen, division heads,
Taxable Bonus key officers, or by all employees collectively. Bonuses are supplemental or additional compensation.
However, if they are linked solely to productivity under the productivity incentive plan of the employer
pursuant to RA 6971, they should be considered as de minimis benefits.

Let us look at its designated portion in the Form 2316 on how they are
reported.

Those which are not specifically identified in the return can be specified
under item 49.

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 REGULAR COMPENSATION
The regular compensation includes fixed remunerations due to be received by an employee every
period such as:
1. Basic salary
2. Fixed allowances such as cost-of-living allowance, fixed housing allowance, representation,
Inclusions
transportation, and other allowances paid to an employee every payroll period
Fixed Allowances are those which are fixed in amounts and regularly received as part of the basic
monthly, bi-weekly, weekly or daily salaries or wages are part of regular compensation. This applies
even if a portion of the allowances are actually used in the employer's business.
a. Ordinary and necessary allowances for travelling, representation or entertainment expense of
employees incurred in the pursuit of the employer' trade, business or profession.
b. The expense is subject to accounting or liquidation.
Exception Rule
c. Any excess advances are returned to the employer.
Hence, variable and liquidated allowances are not subject to tax. However, amounts of allowances that
are retained by the employee for himself shall be considered compensation.
The paid absences of an employee applied against his vacation or sick leave credits which are
Paid Absences
normally received as part of the regular salary is part of the regular compensation.

Regular Income Taxation Compensation Income page 14

 Let us look at the portion designated for Regular
Compensation on Form 2316.

Similar to supplementary compensation, those items which

are not specifically identified as regular compensation
income in the form can be specified under item 42.

FLOWCHART OF TAX TREATMENTS

Following is a flowchart of the tax treatments to guide you. When using this flowchart, it is imperative that you know where a
certain item of compensation is classified.

Regular Income Taxation Compensation Income page 15

Regular Income Taxation Compensation Income page 16
 Illustration 9.3 COMPREHENSIVE
Jackie earned the following during the taxable year.
Monthly Basic Pay, net of P3,500 mandatory deductions 26,500
Overtime Pay 12,000
Collective Negotiation Agreement 25,000
Midyear Bonus (13th Month Pay) 30,000
Yearend Bonus (14th Month Pay) 30,000
Christmas Gift 5,000
Clothing Allowance 6,000
Monetized Unused Vacation Days (five days) 7,500
Monetized Unused Sick Days (three days) 4,500
Anniversary Gift 5,000
The taxable 13th MP&OB shall be computed as follows:
Private R&F Private M/S Gov’t R&F` Gov’t M/S
Taxable Monetized VL - - - -
Taxable Monetized SL - - - -
Taxable Anniversary/Christmas Gift 5,000 5,000 - -
Taxable CNA Benefit 25,000 25,000 25,000 25,000

Regular Income Taxation Compensation Income page 17

 Taxable Clothing Allowance - - - -
Excess De Minimis Benefits 30,000 30,000 25,000 25,000
Subject to Fringe Benefit Tax - (30,000) - (25,000)
Taxable De Minimis Benefits 30,000 - 25,000 -
Midyear Bonus 30,000 30,000 30,000 30,000
Yearend Bonus 30,000 30,000 30,000 30,000
Christmas Gift - - 5,000 5,000
Total 13th Month Pay and Other Benefits 90,000 60,000 90,000 65,000
Exemption (90,000) (60,000) (90,000) (65,000)
Taxable 13th Month Pay and Other Benefits - - - -
Overtime Pay 12,000 12,000 12,000 12,000
Supplementary Compensation 12,000 12,000 12,000 12,000
Regular Compensation (26,500 x 12) 318,000 318,000 318,000 318,000
Taxable Compensation before P250,000 threshold 330,000 330,000 330,000 330,000
It will be reported in Form 2316 as:
Private R&F Private M/S Gov’t R&F` Gov’t M/S
Gross Compensation Income 485,000 455,000 485,000 460,000

Regular Income Taxation Compensation Income page 18

 Non-Taxable Compensation Income (405,000) (375,000) (405,000) (380,000)
Taxable Compensation Income 80,000 80,000 80,000 80,000

MINIMUM WAGE EARNER

A minimum wage earner refers to a worker in the private sector who is paid the minimum wage or to an employee in the public
sector with compensation income of not more than the statutory minimum wage (i.e., those with salary grade 1 to 3) in the non-
agricultural sector where he or she is assigned. The statutory minimum wage refers to rate fixed by the Regional Tripartite Wage
and Productivity Board of the Department of Labor and Employment or P5,000/month or P60,000/year, whichever is higher.

As discussed previously, their Basic, Holiday, Hazard, Overtime and Night Differential Pays are non-taxable despite presence
of other forms of income.

Rules on Change in Status

1. When an employee becomes a minimum wage earner during the year, he/she shall be subject to income tax only on
compensation earned before becoming a minimum wage earner.
2. When an employee ceases to be a minimum wage earner during the year, due to increase in salary, only the income for
the rest of the year is taxable.

COLA Treatment
COLA forms part of statutory minimum wage, thereby, it is exempt.
Regular Income Taxation Compensation Income page 19
 Illustration 9.4 MINIMUM WAGE EARNER
Tiana was a minimum wage earner from January 1 to June 30 of the taxable year. She was promoted effective July 1 and was
given a salary rate higher than the statutory minimum wage. The following are the benefits she received during the year.
Jan 1 – Jun 30 Jul 1 – Dec 31
Monthly Basic Pay 9,000 15,000
13th Month Pay - 12,000
Rice Subsidy 6,000 6,000
Medical Allowance to Dependent 1,000 2,500
Holiday Pay 2,000 4,000
Overtime Pay 5,000 7,000
Commission 45,000 78,000
Total Mandatory Deductions 3,000 4,000
Her taxable income for the year would be computed as follows:
Actual Limit Excess
Rice Subsidy 12,000 24,000 -
Medical Cash Allowance (Jan-Jun) 1,000 1,500 -
Medical Cash Allowance (Jul-Dec) 2,500 1,500 1,000
Total Taxable de minimis 1,000

Regular Income Taxation Compensation Income page 20

 13th Month Pay 12,000
13th Month Pay and Other Benefits 13,000
Exemption Threshold 90,000
Taxable 13th Month Pay and Other -
Benefits
Holiday Pay 4,000
Overtime Pay 7,000
Commission 123,000
Supplementary Compensation 134,000
Regular Compensation (90,000-4,000) 86,000
Taxable Compensation Income before P250,000 threshold 220,000
To conform with the format of the Form 2316, it shall be reported as:
Gross Compensation Income 312,500
Less: Non-Taxable/Exempt Income (92,500 + 220,000*) 312,500
Gross Taxable Compensation Income -
Since the taxable compensation income before the P250,000 threshold of P220,000 is lower than the exemption threshold, this
is the amount added to the P92,500 non-taxable income.

Regular Income Taxation Compensation Income page 21

 SUBSTITUTED FILING
As discussed in Module 4, pure compensation income earners may be relieved from the obligation to file their annual income
tax return if they have no taxable income from other sources other from their lone employer. The employee may avail of the
substituted filing system wherein the employer shall withhold the income tax of the employee's compensation. The Form 1700,
however, is required if the employee has other taxable income or has more than one employer, either concurrent or successive,
during the year.
Illustration 9.5 SUBSTITUTED FILING
Pri Lance has two concurrent employers during the taxable year, both of which are not knowledgeable of Pri’s employ on the
other. He does not hold any managerial or supervisory position on either employer. He received the following benefits during
the year.
Employer A Employer B
Basic Pay 140,000 380,000
13th Month and Other Benefits 50,000 85,000
Overtime Pay 16,000 -
Holiday Pay 12,000 28,000
Commission 60,000 -
Tax Withheld - 32,000

Regular Income Taxation Compensation Income page 22

 More likely, the employers will treat his income as being earned only at their company. Pri would then consolidate such for
the filing of Form 1700.
2316 (A) 2316 (B) 1700
13th Month Pay and Other Benefits 50,000 85,000 135,000
Exemption Threshold 90,000 90,000 90,000
Taxable 13th MP&OB - - 45,000
Overtime Pay 16,000 - 16,000
Holiday Pay 12,000 28,000 40,000
Commission 60,000 - 60,000
Supplementary Compensation 88,000 28,000 161,000
Regular Compensation 140,000 380,000 520,000
Taxable Compensation Income 228,000 408,000 681,000
His Form 2316 from both employers would look like this:
Employer A Employer B
Gross Compensation Income 278,000 493,000
Less: Non-Taxable/Exempt Income *278,000 335,000
Gross Taxable Compensation Income - 158,000

Regular Income Taxation Compensation Income page 23

 Tax Due - 32,000
Tax Withheld - 32,000
Tax Payable - -
*Take note that the taxable compensation income is less than the P250,000 exemption threshold.

In the Form 1700, however, the P250,000 is not included reported as exempt compensation.
Gross Compensation Income (278,000+493,000) 771,000
Less: Non-Taxable/Exempt Income (the threshold for 13thMP&OB) 90,000
Gross Taxable Compensation Income 681,000

Tax Due 100,250

Less: Tax Credits (Tax Withheld) 32,000
Tax Payable 68,250

FILING AND DEADLINE OF RELEVANT FORMS

The following are the relevant forms for compensation income.

Regular Income Taxation Compensation Income page 24

 Deadline
Form Name
Manual Filing eFPS Filing
Monthly Remittance Return of Income On or before the tenth (10th) day of 11th-15th day following
Taxes Withheld on Compensation the following month in which withholding month depending on
1601C withholding was made the taxpayer’s line of business
Except for December Return which Except for December return which
is due on January 15 is generally due on January 20
Annual Information Return of Income On or before January 31 of the year following the calendar year in which
1604C Taxes Withheld on Compensation the compensation payment and other income payments were paid or
accrued
Certificate of Compensation Payment / To be issued to payee on or before January 31 of the succeeding year in
Tax Withheld for Compensation which the compensation was paid, or in cases where there is
2316
Payment with or Without Tax Withheld termination of employment, it is issued on the same day the last
payment of wages is made.

References:
Banggawan, R. (2019). Income Taxation. Pasay City: Real Excellence Publishing.
Valencia, G. & Roxas, E. (2016). Income Taxation. Baguio City: Valencia Educational Supply.
Reyes, V. (2019). Income Tax Law and Accounting under the TRAIN Law. Manila: GIC Enterprises & Co., Inc.
Ampongan O. (2018). Income Taxation. Mandaluyong City: Millennium Books, Inc.

Regular Income Taxation Compensation Income page 25

 Self-Check!
Basing on your readings, answer the following questions.
1. Classify employees as to their functions, taxability and employer.
2. What are the relevant forms to be filed in connection to compensation income?
3. What items of compensation income are non-taxable?
4. What are the specific items of de minimis benefits and what are their exemption limits?
5. What is the tax treatment for excess de minimis benefits?
6. What is the exemption threshold for 13th Month Pay and Other Benefits? How is the excess over that amount treated?
7. What are the items of supplementary compensation?
8. What are the items of regular compensation?
9. To what extent are minimum wage earners exempt on their compensation income?
10. What are the rules on change in status of MWEs?
11. What is the effect of more than one employer, whether concurrent or successive, on the income tax return of a purely
employed taxpayer?

Exercise 9.1 TRUE OR FALSE

Determine whether the following statements are true or false.

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 1. A regular employee is subject to regular income tax only.
2. The overtime pay of MWEs is exempt from income tax.
3. An employee who became a MWE during the year is exempt from tax for the entire year.
4. The excess of 13th MP&OB over P90,000 is considered as compensation income.
5. The Christmas gift of private employees forms part of “other benefits” while that of government employees is
considered as a de minimis benefit.
6. Fixed allowances are supplemental compensation.
7. Benefits from productivity incentive schemes are treated as a de minimis benefit.
8. Benefits for the advantage of the employee are exempt from income tax.
9. The excess of the 13th MP&OB over the P90,000 is subject to Fringe Benefit Tax if the employee holds either a
managerial or supervisory function.
10. The sick leave credit of government employees up to 10 days is exempt de minimis.
11. Only the mandatory amount of contributions to SSS/GSIS, PHIC and HDMF is non-taxable.

Exercise 9.2 MULTIPLE CHOICE

Choose the best answer from the choices provided.
1. Which of the following is a taxable compensation income?

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 a. Separation pay die to resignation
b. Retirement pay under BIR approved retirement plan
c. Separation pay due to disability
d. Terminal pay due to death
2. Which of the following is a taxable compensation income?
a. Employee share in social security contributions
b. Cost of living allowance
c. De minimis benefits within their limits
d. Separation pay due to closure of employer’s business
3. Meal allowance is taxable when given
a. For overtime duty
b. In cash
c. For night shift assignment
d. As incentive to all employees
4. The term ‘de minimis’ does not include
a. Christmas bonus
b. Christmas gift

Regular Income Taxation Compensation Income page 28

 c. Rice subsidy
d. Monetized unused vacation leave
5. The P90,000 exemption threshold is applicable for every _______ every _________.
a. employer; year
b. employee;year
c. employer; quarter
d. employee; quarter
6. Which of these is an absolute exempt benefit of a minimum wage earner?
a. Holiday pay
b. Vacation pay
c. 13th month pay
d. Excess de minimis benefits

Exercise 9.3 CLASSIFICATION

Classify the following items of compensation income basing on their tax treatments.
A Exempt Benefit C 13th Month Pay and Other Benefits E Regular Compensation
B De Minimis Benefit D Supplementary Compensation F Subject to Fringe Benefit Tax

Regular Income Taxation Compensation Income page 29

 1. Monetized unused vacation leave credits of government rank-and-file employees in excess of 10 days
2. Benefits from productivity incentive schemes
3. Emoluments
4. Additional compensation allowance of government employees
5. Personal economic relief allowance of government employees
6. Fixed transportation allowance of managerial employees
7. Christmas cash gift of private employees
8. Profit sharing bonus
9. Laundry allowances of private employees
10. Monetized unused sick leave credits of private managerial employees which was less than 10 days
11. 14th month pay
12. Cost of Living allowances
13. Employee share on Pag-Ibig contributions
14. Meal subsidy for employee’s family in excess of P2,000
15. Paid absences where vacation leave credits were applied

Regular Income Taxation Compensation Income page 30

 Problem 9.1 DE MINIMIS BENEFITS
Mavis, received the following de minimis benefits during the year. She earns P600 daily.
Monetized unused vacation leave credits 12 days
Monetized unused sick leave credits 5 days
Medical cash allowance to dependents P300 per month
Clothing allowance P10,000
Rice subsidy P10,000 per quarter
Actual medical assistance P15,000
Laundry allowance P2,500 per semester
Anniversary gift P7,000
Benefits from Collective Bargaining Agreement P15,000
Determine the taxable de minimis benefits and their treatment given Mavis is a:
Employee Type Rank-and-File Managerial
Government
Private

Problem 9.2 13TH MONTH PAY AND OTHER BENEFITS

Jonathan, a purely employed taxpayer, received the following during the taxable year.
13th Month Pay (Midyear Bonus) 48,000

Regular Income Taxation Compensation Income page 31

 14th Month Pay (Yearend Bonus) 48,000
Christmas Gift 5,000
Taxable de Minimis Benefits 20,000
Determine the taxable 13th Month Pay and Other Benefits given that Jonathan is a:
Employee Type Rank-and-File Managerial
Government
Private

Problem 9.3 MINIMUM WAGE EARNER

Mang Ben became a minimum wage when the statutory minimum wage effective July 1 matched his current salary rate. He
received the following benefits during the year.
Jan-Jun Jul-Dec
Basic Pay 75,000 75,000
13th Month Pay - 12,500
Holiday Pay 2,000 -
Taxable De Minimis Benefits 15,000 18,000
Overtime Pay 6,000 8,000
Honorarium 10,000 -
Compute for the following:
1. Gross Compensation Income

Regular Income Taxation Compensation Income page 32

 2. Non-Taxable Compensation Income exclusive of the P250,000 threshold
3. Claimable portion of the P250,000 Exemption Threshold
4. Total Non-Taxable Compensation Income
5. Income Tax Due

Problem 9.4 CONSOLIDATED INCOME TAX RETURN

Miss Ligaya Calungcutan resigned on her previous job on Saddy Company effective May 31 of the taxable year. She was hired
in Joy Company on June 2. The following are the benefits she earned from both employers.
Saddy Joy
Basic Pay, net of P4,500 deductions 165,000 248,500
Prorated 13th Month Pay 15,600 23,400
Taxable De Minimis Benefits 10,000 27,000
Christmas Bonus - 15,000
Other Supplementary Compensation 20,000 32,000
In the Form 2316 it prepared, Joy Company was not able to report the benefits received by Miss Ligaya from Saddy Company.
In addition, both companies withheld income taxes only to the extent of taxable benefit it gave to Miss Ligaya.
Fill out the table below by computing the figures to be reported on the relevant forms.
Employee Type 2316 (Saddy) 2316 (Joy) 1700
Gross Compensation Income
Non-Taxable Compensation
Taxable Compensation Income

Regular Income Taxation Compensation Income page 33

 Problem 9.5 COMPREHENSIVE
Miss Ma. Dolly Rigat, a private employee, obtained the following benefits from her employment during the year.
Basic Pay, gross of P74,000 mandatory deductions P 780,000
13th Month Pay 65,000
Monetized Unused Vacation Leave Credits (8 days) 26,000
Monetized Unused Sick Leave Credits (2 days) 6,500
Uniform Allowance 15,000
Christmas Cash Gift 10,000
Benefits under a Productivity Incentive Scheme 20,000
Rice Subsidy 35,000
Laundry Allowance 5,000
Medical Assistance 10,000
Overtime Pay 16,000
Cost of Living Allowance 30,000
Holiday Pay 10,000
Determine her taxable compensation income before the P250,000 exemption assuming she is a:
_____________1. Supervisory employee
_____________2. Rank-and-File employee

Regular Income Taxation Compensation Income page 34