Millennials’ Tax Filing Made Easy with a Tax Calculator in the Philippines
Millennials are the latest age group to enter the employment world. Slowly, they are realizing that it is very different from the culture they had when they were still studying in schools and universities. Some of them would even find out that perhaps they come totally unprepared to face the real world. In fact, a few wishes that they had taken classes that could help them become adults—such as a lesson on Philippine tax calculator.
Despite this, they remain a hopeful bunch, brimming with ideas and ideals that are far from the usual. Millennials thrive on being a defying force against the traditional. This translates into their work ethics and more often than not, employers tend to appreciate their boldness in their choices.
Those who are looking to start their own business are also utilizing their technological knowledge to help them run their startups. These would include having their own websites, placing ads on digital platforms, as well as using an online tax calculator in the Philippines—so they wouldn’t have to worry about miscalculations.
Of course, this does not mean that they completely rely on this innovation to compute their taxes. They also make sure that they have a proper understanding of how much they need to pay to the government.
Whether you are an employee, a freelancer, or a small business owner, it would be better for you to start reading up on the tax laws in the country. To aid you in this entire process, continue reading below.
An Overview of the TRAIN Law
This 2018 marks the start of the Tax Reform for Acceleration and Inclusion (TRAIN) law. Basically, it is the revised version of the National Internal Revenue Code (NIRC) of 1997, wherein major changes have been implemented; one of which is the introduction of the lower income tax bracket for low-income earners. On top of this, there is an additional excise tax on certain products like cars, gasoline, and beverages.
The Income Tax Computation has experienced a major shift. With new income tax rates comes a reform to the Tax Calculator in the Philippines. The TRAIN law also implemented Value Added Tax (VAT) exemptions on certain commodities and products.
The most popular part of the TRAIN law is the reduction of the personal income tax of a majority of individual taxpayers. Before the enactment of this new law, an individual employee or self-employed taxpayer would normally have to file an income tax at the rates of 5% to 32% depending on one’s bracket.
So, if you are earning the minimum wage of Php 15,000, you can have an additional take-home pay of Php 1,541.83 per month under the 2018 tax reform. Since its implementation on January 1, 2018, the personal income tax rates now come in two sets:
- Income Tax Tables to be implemented for the years 2018-2022
- Income Tax Tables to be applied from the year 2023-onwards
Under TRAIN, a taxable income of Php 250,000 will be subject to the rate of 20% to 35% for the year 2018, and 15% to 35% starting on 2023. In addition to this, the deductible 13th-month pay and other benefits are now higher at Php 90,000 compared to Php 82,000 under the old NIRC law.
Your take-home pay will generally increase. However, the amount you pay for the good and services you usually avail would also be raised.
Apart from that, you also have to be aware of the bracket where you belong. Keep in mind that if you are earning Php 250,000 or below annually, you will no longer pay any income tax, while those that pay Php 250,000 and Php 400,000 per year will be charged an income tax rate of 20% on the excess. This increases as the rate of your annual wage increases. Remember that this is effective for the year 2018 up until 2022 only because from the year 2023 onwards, the income tax rates will be further adjusted accordingly so that withholding taxes have lower rates than before.
As a Millennial in the professional field, it is vital that you should be knowledgeable about taxation know-how because this will contribute to your lifestyle and how you would go about it.
Tax Calculator Checklist
Before you go about the tax calculation, you should formulate a checklist that can be your guide to the accurate computation of your tax in the Philippines. List down your basic salary, status, overtime pay, late deduction, SSS Contribution, PhilHealth Contribution, and Pag-IBIG Contribution.
Follow these steps so you will have a prior idea on how to use the tax calculator in the Philippines.
- Determine Your Taxable Income
To compute your taxable income, you may follow this formula:
Taxable Income = (Monthly Basic Pay + Overtime Pay + Holiday Pay + Night Differential) – (SSS/PhilHealth/Pag-IBIG deductions – Tardiness – Absences)
Let’s say an employee is earning Php 15,000 from their job and their civil status is single, with no dependents based on the rates of government contributions. This individual will pay:
- Php 545.00 – SSS Contribution (From the SSS Contribution Table)
- Php 206.25 – PhilHealth Contribution (From the PhilHealth Contribution Table)
- Php 100 – Pag-IBIG Contribution
Your taxable income will total to an amount of Php 14,148.75. Here is how it is computed:
Taxable Income = Php 15,000 – (Php 545.00 + Php 206.25 + Php 100)
= Php 15,000 –851.25
= Php 14,148.75
- Refer to the Bureau of Internal Revenue (BIR) Tax Table when Computing Your Income Tax
The Annual Withholding Tax Table can be derived by multiplying all values in the Monthly Table by Twelve (12)—except for the percentages.
BIR TAX TABLE:
Computing your taxes manually may be too much of a hassle for you, good thing that there are tax calculators in the Philippines that can do this job. Through them, you don’t even need to leave the comfort of your home.
Personal Tax Income and Excise Tax Under TRAIN
As previously mentioned, TRAIN law decreases the tax on personal income, estate, and donation. However, it increases the tax on certain incomes, documents (documentary stamp tax), and also excise tax on minerals, petroleum products, automobiles, and cigarettes.
The TRAIN law also imposes excise tax on sweetened beverages and non-essential services, such as invasive cosmetic procedures. Aside from this, it removes the tax exemption of Lotto and other PCSO winnings amounting to more than Php 10,000. By knowing these changes, you will not become overwhelmed by the reforms. After all, it is important to be smart about this vital information.
The TRAIN law also aims to simplify tax compliance by having certain provisions geared towards that purpose.
On reforms and shift on excise taxes, the increase in their rate should factor in how you see the tax calculation in the country. The significant shift in rates would be valuable information if ever you are going to avail a certain product or service so you know how their rates are proposed.
There are also amendments to the Value Added Tax (VAT) which lessen the weight of taxes to taxpayers:
- Increase of VAT threshold from Php 1,919,500 to Php 3,000,000
- Starting 2019, the sale of drugs and medicines for diabetes, high cholesterol, and hypertension will have a VAT exemption.
- Increase of VAT exemption for the lease of a residential unit from Php 12,800 to Php 15,000.
- Association dues, membership fees, and charges collected by homeowners’ associations and condominium corporations are now exempt from VAT.
If you are planning on starting your newfound independence as a professional by investing in a new home, you’ll be glad to hear about these VAT exemptions. The exemption on drugs and medicines is also good news for you, if you are the one providing help to sickly grandparents or parents.
Here are the other items that are exempted from VAT:
- Raw Food
- Agricultural Products
- Health and Education
- Senior Citizens
- Renewable Energy
- Tourism Enterprises
- BPOs in special economic zones
- Socialized Housing
- Leases below 15,000 per month
- Condominium association dues
In addition to this, the excise tax on cigarettes, manufactured oils and other products, mineral products, and automobiles have also shifted dramatically—taxes on these goods have been increased.
Simpler tax compliance is also part of the agenda of the TRAIN law. The notable amendments include the quarterly filing of VAT Return and payment of tax instead of the previous monthly scheme. As a Millennial venturing into the professional world, taking note of these changes are a plus as it makes you an efficient and consistent taxpayer.
Benefits of Determining Your Taxable Income using a Tax Calculator in the Philippines
These chunks of information will be a lot to take in and you are probably scratching your head on how to do it yourself. Don’t fret because there are tax calculators in the Philippines that are reliable sources on the computation of your personal income tax.
An online tax calculator in the Philippines like Taxumo is a reliable resource. But what are the benefits of determining your taxable income using a tax calculator?
- Save yourself the hassle of manually computing for your taxable income
- You will know the dissemination of government contributions
- You can budget your salary according to tax rates and excise tax on commodities
- If you are using an online tax calculator, you can also have the option to avail their service of filing taxes for you.
- If you have an employee-employer tax filing scheme, you can check if your income is properly computed.
Computing and Filing your Tax When You are a Freelancer
Millennials can be trailblazers in their careers. A bold move in being a professional is being a freelancer. It is commendable because there is a sense of independence that comes with it. Speaking of independence, this is also applicable to filing your tax and paying government contributions.
With the emergence of online tax calculators in the Philippines, you can file and pay your taxes in just a matter of minutes. These calculators are not just for the Millennial freelancer, but also for those who are small business owners and self-employed professionals.
Now, you won’t have to worry about dreading the date for filing and paying your taxes because of the unbelievably long amount of time to do it. You can take an average of 182 hours a year to comply with tax regulations according to the World Bank and PricewaterhouseCoopers (PwC)’s “Paying Taxes 2018” report.
The TRAIN law requires that you pay and file your taxes quarterly, meaning you will have to take some time off your work schedule and join the long queue in your respective bank. Fortunately, online tax payment facilities are now a reality.
You wouldn’t have to worry about lost time because filing and paying taxes can be done with just a few clicks of your mouse. Although, you must keep in mind that you have to find a reliable online tax calculator in the Philippines so you won’t have the risk of being scammed.
Convenient and Quick Tax Filing with Taxumo
With an easy calculation of tax and filing, Taxumo will be the Millennial’s go-to tax calculator. In just three easy steps, filing taxes are no longer a hassle for freelancers, business owners, and self-employed individuals.
Taxumo can provide real-time tax calculation which can help you avoid tax bill shock. Plus, you can be alert in tax payments by knowing exactly how much you have to pay. Our website has an easy interface that has auto-generated tax forms where everything is automatically filled up and generated.
Accessible anytime and anywhere, we are also in partnership with multiple payment channels so you just have to choose the one that’s more convenient for you.
Who doesn’t want to be less hassled with their taxes anyway? For sure, you would want a quick, easy, and safe way for you to file your taxes correctly. If so, then choose only Taxumo as your trusted online tax calculator in the Philippines!
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