Are you an employer in the Philippines wondering about payroll taxes? In this post, we'll provide a guide to payroll taxes in the Philippines and cover the essential information you need to know.
Payroll taxes are taxes paid on the wages and salaries of employees. In the Philippines, employers are responsible for deducting payroll taxes from their employees' salaries and remitting them to the government.
There are several types of payroll taxes that employers in the Philippines are required to deduct and remit to the government:
Income Tax: While employers don’t contribute to their employees’ income tax, they must act as the withholding agent by deducting income taxes from their employees’ monthly wages. The Philippines uses a graduated income tax composed of six income brackets:
Social Security Contributions: Employers and employees are required to contribute to the Social Security System (SSS), an insurance fund that protects employees from financial burdens related to disability, maternity, sickness, old age, and other contingencies. The monthly contribution rate is 9.5% for employers and 4.5% for employees, with a cap of ₱1,900 for employers and ₱900 for employees.
Health Insurance Contributions: Employers in the Philippines contribute to the state health insurance fund called the Philippine Health Insurance Corporation (PhilHealth). The total contribution rate is 4% of the employee’s base monthly wage, with an income ceiling of ₱80,000. The contribution is shared equally between the employer and employee.
Pag-IBIG Contributions: Employers and employees are required to contribute to the Home Development Mutual Fund (Pag-IBIG), a government-guaranteed savings fund for employees in the Philippines—though its primary goal is to help employees finance a new home. Employers contribute 2% on all employee salaries, while employees contribute 1% on salaries of ₱1,500 or below and 2% on salaries over ₱1,500. Monthly contributions are mandatory for all SSS-covered employees.
Employees’ Compensation Program: The Employee Compensation Program (EC) provides employees with financial support for work-related illnesses or injuries. The employer contribution rate for the EC is ₱10 for employees who earn monthly salaries of ₱14,749 or less and ₱30 for salaries over ₱14,749.
13th-Month Pay: Every Filipino employee who has worked for at least one month within the calendar year is entitled to an annual 13th-month compensation. The 13th-month pay amounts to one-twelfth of the employee’s base yearly income, and employers must deliver it by December 24. Contractors, commission-based workers, and government employees are not entitled to 13th-month pay—though government employees receive a similar year-end bonus.
Employers in the Philippines are required to remit payroll taxes to the government on a monthly basis. The deadlines for remittance are as follows:
Income Tax: The 10th day of the following month
Social Security Contributions: The 15th day of the following month
Health Insurance Contributions: The 10th day of the following month
Pag-IBIG Contributions: The 10th day of the following month
Failure to deduct and remit payroll taxes on time can result in penalties and fines. Employers are responsible for ensuring that they are compliant with Philippine tax laws and regulations.
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