Higher minimum wage in Metro Manila tax exempt: BIR

Higher minimum wage in Metro Manila tax exempt: BIR

THE HIGHER minimum wage for Metro Manila given the additional P22 cost-of-living allowance (COLA) is exempt from income tax, the Bureau of Internal Revenue (BIR) said.

The BIR has released Revenue Memorandum Circular No. 23-2011 dated June 8, affirming Republic Act 9504 which exempts minimum wage earners from paying income tax.

"Minimum wage earners are exempt from the payment of income tax on their taxable income, including their holiday pay, overtime pay, night shift differential pay and hazard pay," the circular stated.

However, income derived from other sources on top of the minimum wage will no longer be tax exempt, the bureau said.

The COLA raised the minimum wage for workers in the following sectors:

• non-agriculture, P426;
• agriculture, P389;
• private hospitals with bed capacity of 100 or less, P389;
• retail/service establishments employing 15 workers or less, P389; and
• manufacturing establishments regularly employing less than 10 workers, P389.

Wage boards in other regions have yet to announce decisions on wage increase petitions filed by labor groups.

Meanwhile, the BIR also streamlined the process of granting tax exemptions to officials and employees who have been retrenched due to physical disability, sickness, death or others cause beyond their control.

According to the National Internal Revenue Code of 1997, the separation pay will be exempted from income and withholding tax regardless of the employee’s age or length of service.

Employees, often from the private sector, previously had to request for a ruling from the BIR head office to attest to the tax exemption.

"Without a ruling, the employer deducts withholding taxes and remits the same to the BIR to avoid the possibility of being assessed. To the detriment of the employee, the recovery of the withheld taxes can only be made through tax refund," stated BIR’s Revenue Memorandum Order No. 26-2011 dated June 13.

The order effectively devolves the issuance of rulings to the 19 BIR Revenue Regions nationwide. Requesting officials and employees can apply for the tax break in their revenue district office. The BIR’s legal division will evaluate the certificates of tax exemption, before being issued by the regional director. --

Diane Claire J. Jiao

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