Employees of ROHQs/RHQs, OBUs, Petroleum Contractors and sub-contractors

66. .. oe, an alien employed in Pan Pacific Petroleum, a Petroleum Service Contractor,
received compensation income of P5M in 2018, inclusive of P400.000 13 th month pay and other benefits.
G.l. Joe’s income tax due for the year shall be:
a. £490,000 c. £1,421,200

b. £931,000 d. nil

❖ Answer: C
Solution:
Compensation income P5,000,000
th
Less: Non-taxable 13 month pay and other benefits (90,000) Total
business taxes for 2018 P4,910,000

TAX DUE:
On 1st P2M P490,000
On excess of (P4,910,000 - P2M) x 32% 931,200
Total tax due P1,421,200

• BASIS: RR 8-2018
■ Under the TRAIN Law, Special employees (employees of ROHQs/RHQs, OBUs,
Petroleum contractors and sub-contractors holding managerial or technical
positions) are now subject to basic income tax, without prejudice to the
application of preferential tax rate under existing tax treaties, if
warranted.

The overriding consideration in subjecting such income to basic tax is the

Prior to TRAIN Law, their compensation income is subject to a final tax rate of
15%, except for Special Filipino employees who may be subject to Basic Tax
or 15% FWT.

MINIMUM WAGE EARNERS and Senior Citizens (SC) and Persons with Disability (PWD)
67. Which of the following statements regarding minimum wage earner (MWE) is correct?
a. The MWE is exempt from income tax on his basic statutory minimum wage (SMW).
b. The MWE is exempt from income tax on his overtime pay, holiday pay, night shift differential, and
hazard pay.
c. The MWE is subject to income tax on income other than those mentioned in “a" and “b”.
d. All of the above

Answer: D
 68. What is the correct treatment of overtime pay, holiday pay, night shift differential, and h pay received
by those whose basic pay is more than the SMW?
a. Exempt from income tax.
b. Subject to income tax, and consequently, to the withholding tax on compensatio income.
c. Considered as fringe benefit subject to fringe benefit tax, provided the employee i s holding
managerial or supervisory position.
d. None of the above.
I

❖ Answer: B
0 The employee is not considered MWE since his basic pay is more than the Statutory Minimum Wage. Thus, the amount of basic
pay, OT, holiday pay, NSD, and hazard pay, shall be subject to income tax, consequently, to creditable withholding tax on
compensation.

69. Minimun Wage Earners (MWEs) receiving “other benefits” exceeding P90,000 limit shall be
a. Taxable on the excess benefits only
b. Taxable on the excess benefits as well as his salaries, wages and allowances, just like an
employee receiving compensation income beyond the statutory minimum wage.
c. Exempt from income tax
d. None of the above

❖ Answer: A
Prior to January 24,2017, in relation to MWE as provided under RR 10-2008, an employee who receives/earns additional
“compensation" such as commissions, honoraria, fringe benefits, benefits in excess of the allowable P90.000 taxable
allowances and other taxable income other than the statutory minimum wage, overtime pay, holiday pay, night shift differential,

hazard pay shall not enjoy the privilege of being a minimum wage earner HOWEVER, the Supreme

Court (SC) ruled that nothing to this effect can be read from RA 9504 (Minimum Wage Earner Law). In the case of Soriano vs.

Secretary of Finance with GR No. 184450 dated January 24, 2017, the SC held that a minimum wage
earner who receives/earns additional “compensation” such as commissions, honoraria, fringe benefits, benefits in excess of the

allowable P90.000 (P82.000 prior to 2018) tax exempt bonuses and other benefits shall still enjoy the privilege of

being a minimum wage earner. According to SC, RA 9504 is silent on whether compensation-related benefits
exceeding the P90.000 threshold (as amended) would make an MWE lose exemption. RA 9504 has given definite criteria for what
constitutes an MWE, and RR 10-2008 cannot change this.

70. Pedro, single, is a minimum wage earner of Makibaka Corporation. In addition to his basic minimum
wage of P180,000 for the year, he also received the following benefits:
■ Holiday pay, P32.000
■ Overtime pay, 25,000
■ Night shift differential, 18,000
The income subject to tax should be
a. P57,000 c. P255,000
b. P75.000 d. nil

Use the following data for the next three (3) questions:
Pedro, single, is a minimum wage earner. In addition to his basic minimum wage of P180,000 for the
year, he also received the following benefits:
■ | De miniminis, P140,000 (P80.000 over the ceiling)
■ 13th month pay and other benefits, P112,000

Answer: D
71. Pedro’s taxable income assuming the taxable year is 2017 should be:
a. P60.000 c. P192.000
b. P110,000 d. nil

❖ Answer: A
De minimis - over the ceiling P80,000
13th month pay and other benefits 112,000
Total P192,000
Tax exempt benefits prior to TRAIN Law (82,000)
Less: Basic personal exemption (50,000)
Taxable Net Income P60,000

£□ As provided for in a recent decision by the Supreme Court (Soriano vs. Sec. of Finance with GR No. 184450), an
individual taxpayer designated as MWE like Pedro, shall be exempt on his compensation income
as MWE regardless of the amount of his 13th month pay and other benefits.
Q De minimis within the ceiling is tax exempt
£□ Excess of de minimis over the ceiling shall be added to other benefits GJ The tax exempt benefits prior to 2018 was
P82,000 £2 Personal exemptions are allowed prior to 2018

72. How much is the income tax due of Pedro assuming the taxable year is 2018?
a. P80,000 c. P192.000
b. P102.000 d. nil

❖ Answer: B
Dp minimis - over the ceiling P80,000
13th month pay and other benefits 112,000
Total P192,000
Tax exempt benefits under TRAIN Law (90,000)
Taxable net income P102,000
Income Tax Due (revised tax table)
ra Under the TRAIN Law, the 1st P250.000 of taxable income is exempt from tax.

73. How much is the income tax due of Pedro in 2018 assuming he also earned P450.000 derived from
his business of buying and selling various consumer products?
a. P30.000 c. P68.000
b. P38.000 ■ d. nil

♦> Answer: C
 Solution: P450.000
Business income
80,000
De minimis - over the ceiling 13th month
112,000
pay and other benefits
P642.000
Total (90,000)
Tax exempt benefits under TRAIN Law
P552,000
Taxable net income
P6d,000
Income Tax Due (revised tax table)

the taxable yoar, whether from

❖ Answer: A
0 For income taxation purposes, a senior citizen is taxable just like an ordinary individual
taxpayer.