Primer on the Minimum Wage Tax Exemption

It’s that time of the year when we are again required to pay taxes and file our income tax returns. Some, however, are exempt from paying income tax. Minimum wage earners are not required to pay income taxes. Here’s a primer of the new law.

What is Republic Act No. 9504?

This law, which was approved on 17 June 2008 (full text), exempts minimum wage earners from paying income tax. It amends certain provisions of the the National Internal Revenue Code Of 1997.

Who are covered by the exemption?

Employees in the public and private sectors who are receive minimum salary/wage are covered by the exemption.

Who are considered as statutory minimum wage earners?

The term statutory minimum wage earner shall refer to a worker in the private sector paid the statutory minimum wage, or to an employee in the public sector with compensation income of not more than the statutory minimum wage in the non-agricultural sector where he/she is assigned.

What is the minimum wage in the National Capital Region (NCR)?

The new daily minimum wage of covered workers in the private sector in the National Capital Region (NCR), per Wage Order No. 14, is:

P382 – Non-Agriculture
P345 – Agriculture (Plantation and Non Plantation)
P345 – Private Hospitals with bed capacity of 100 or less
P345 – Retail/Service establishments employing 15 workers or less
P345 – Manufacturing establishments regularly employing less than 10 workers

The minimum wage for other areas are covered by the pertinent wage orders of the Regional Tripartite Wage and Productivity Board (RTWPB).

What are the allowed personal exemptions for individual taxpayer?

Regardless of status (i.e., whether single or married), a taxpayer shall be entitled to the following exemptions:

P50,000 – basic personal exemption for each individual taxpayer
P25,000 – additional exemption for each dependent, not exceeding 4

A dependent means a legitimate, illegitimate or legally adopted child chiefly dependent upon and living with the taxpayer if such dependent is not more than 21 years of age, unmarried and not gainfully employed or if such dependent, regardless of age, is incapable of self-support because of mental or physical defect.

In other words, the maximum total exemption for a family of 6 (2 working spouses and 4 dependent children) is P200,000.

Are companies or employers required to withhold taxes from salaries/wages of covered employees?

No. Employers of minimum wage earners are not required to deduct and withhold taxes for wages/salaries of persons covered by the exemption.

Minimum wage earners are exempt from the payment of income tax on their taxable income. They are not covered by the rules regarding the withholding of taxes. They are also exempt from filing an income tax return.

Holiday pay, overtime pay, night shift differential pay and hazard pay received by minimum wage earners shall also be exempt from income tax.

8 thoughts on “Primer on the Minimum Wage Tax Exemption

  1. Adidoy

    If I work for 5 months for year 2009 and the total income is less than 50K, yet tax are deducted during those months. Can I still ask for a refund? since my income was within the 50K limit for exemption?

    Reply
  2. Alberto Briones

    Sir,

    My understanding, correct me if I’m wrong, is that the 50 k income cited above is annual income. Meaning, if you had worked for only 5 months in 2009, your annual pay should exceed the 50 k threshold, hence you are not covered by the tax exemption.

    VTY

    Reply
  3. Juni

    Sir, my employer erroneously deducted withholding tax for my 2014 basic salary w/c is of minimum wage. I have learned this late when I compared payslips with my co-workers who were minimum wage earners too. They had no tax deduction while mine has despite us having the same monthly salary and deductions like sss, pag-ibig, philhealth. Our employer said even though we are minimum wage earners, we are required to pay income tax in April. Is this true? We were thinking what was the use of a law exempting MWE (Minimum Wage Earners) from withholding tax and then pay income tax by year end. I was demanding a refund for the whole 2014 w/taxes they have withheld from me. Can my employer refund it from the BIR? My understanding is MWE are no longer subject to income tax computation at the end of the year. But our employer is persistent that even though MWE we are subject to computation for the whole year. Hope you can enlighten us on this issue. Thanks in advance.

    Reply
  4. Rhea

    Hi sir!
    I am working at Innodata Legazpi. Ang salary po namin is 260php, which is the minimum wage hir in bicol.BPO po ang nature ng work namin.however, every every month po my deduction kmi s withholding tax. pag may overtime nmn po mas mtaas ung tax.lalo n f ang ot ntpat s regular holiday. ang sbi samin ng hr mandatoy daw un.is it true po?tnx.

    Reply
  5. lynette

    concerns,
    1. i earn Php 8,852/month, do i have to pay tax ? & if i have to pay…..
    2. i have 4 kid’s, not married, what are the forms i need to fill-up so that i will be exempt form paying tax.
    3. a co-worker of mine is single, head of the family, with 70 year old mom in his custody, what is the form he needs to include his mom as his dependent?

    pls email me back…

    thanks.

    Reply
  6. Jen

    Hi Sir, I would like to ask, why does my employer still deduct taxes on our salary. We are working here in Ortigas Center Pasig and we are in “minimum rate” which is P481.00 (we work Mondays-Fridays, 22 working days per month). Every time I ask our accounting officer about this matter, he told me that there is no new tax table being release from BIR so he is still using the Annex A tax table revised version of January 2009, hence he cannot exempt us from taxes. He also said, that the tax can be returned during ITR if ever we really are exempted from paying taxes.I hope you can enlighten me this matter. Thank you so much.

    Reply
  7. cris

    maam\ Sir:

    I had a overtime everyday, and i was paid daily with more than a minimum wage stated by our region, is my overtime is taxable or not?

    Reply
  8. angelica

    sir I worked here in batangas, but our head office is in makati..I earn 500 per day/ monday to saturday/ all holidays without pay / without overtime / but my employer deducted me a tax amounting 662 every 15th _and 30th of the month… tama po ba yan… confused ako kung paano at saan bracket ng ako kabilang. why ganun kalaki ang tax… plss explain, tnx u and godbless

    Reply

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