How to calculate Philippines Tax (TRAIN)?

Modified on Wed, 31 Jul at 10:45 AM

Accurately calculating employee tax is essential for effective payroll management. This guide will help you understand the process of determining taxable income while ensuring regulatory compliance. Here is the formula used to calculate an employee's taxable income:

Taxable income = (Monthly Basic Pay + Overtime Pay + Holiday Pay + Night Differential) - (SSS/PhilHealth/Pag-IBIG deductions + Tardiness + Absences)

Kindly refer to the tax rate table provided below:

Example:

If an employee has the following income details:

Monthly Salary: ₱50,000

Social Security System (SSS): ₱1,350

PhilHealth: ₱1,125

Pag-IBIG: ₱100

The taxable income is calculated as:

₱50,000 - (₱1,350 + ₱1,125 + ₱100) = ₱47,425

The tax is calculated as:

Income Tax = ₱2,500 + (₱47,425 - ₱33,333) * 25%

Income Tax = ₱2,500 + ₱3,523 = ₱6,023

For ROHQ employees, the tax rate on taxable income is consistently calculated at 15%.

By following this guide, you will learn how to apply this formula step-by-step, enabling you to effectively compute the taxable income for your employees.

Related guidelines: