Chapter 10 Flashcards
This refers to any person for whom an individual performs any service of whatever nature as employee of such person.
Employer
This refers to any individual who is a recipient of wages and includes officer, employee or elected official of the Government of the Philippines or any political subdivisions, agency or instrumentality thereof
Employee
Are officers of a company its employees?
Yes
What is the 4 fold test?
332
This is a screening process for employees to hire.
Selection and engagement of employees
This refers to the control of the employer on the payment of wages
Payment of wages
This is the power to retrench or terminate employees
Power of dismissal
This is the power to control the employee on the means and methods by which the work is accomplished
Power of control
What is the most important in the elements of a four fold test?
Power of control
Who are not employees?
Consultants, directors without management function, tv show artists
Those who are given powers or prerogatives to lay down and execute managerial policies and/or to hire, transfer, suspend, lay. off, recall, discharge, assign or discipline employees.
Managerial employees
Those who effectively recommend such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but requires the use of independent judgment.
Supervisory employees
Those who hold neither managerial nor supervisory functions. the rest of those uno are not managerial, supervisory
Rank and file employees
Employees who are recipients of minimum wage.
They are exempt from income tax on their compensation.
Minimum wage earners
Employees who are subject to the regular progressive income tax. working for at least l yr per permanent employee
Regular employee
These are facilities or privileges such as entertainment, medical services, or courtesy discounts on purchases that are of relatively small value and are furnished by the employer merely as a means of promoting the health, goodwill, contentment, or efficiency of his employees.
De minimis benefits
memorize de minimus benefits table
What is the treatment for the excess de minimus over their regulatory l limits?
All are added to 13th month pay and other benefits
Is there a limit to the vacation leave and sick leave de minimus of government employees?
No
What is the treatment for terminal leave pay or commutation of unused leave credits due to involuntary separation?
It is treated as a de minimis benefits subject to a 10-day credit limit
Are employee benefits of non-Filipino nationals taxable on income?
No they are exempt
Are employee benefits of Filipino nationals employed by foreign government embassies taxable on income?
Yes
What are the exemptions to the taxability of employee benefits of Filipino nationals employed by foreign government embassies?
If the work under:
UN
AUSAID
FAO
WHO
etc
Is the exemption of Filipino employees under foreign government embassies automatic?
No. They have to file an application for confirmation of tax exemption with the BIR’s ITAD
What is ITAD?
International Tax Affairs Division
Can a Filipino employee under foreign government embassies be exempt from income tax without a confirmation certificate from the BIR?
No
If the benefits or allowances given to an employee for the benefit or convenience of the employer, is it taxable or not?
Not taxable according to the necessity of the employer rule
How are benefits or allowances given to an employee for the benefit or convenience of the employer treated as?
Business expense
If the business expense of allowances given to an employee for the convenience of the employer is unreasonably excessive, how is then treated?
It is a hybrid expense. The portion representing the privilege to the employee is taxable.
This pertains to the fixed remunerations received by the employee every payroll period.
Regular compensation
This pertains tot he performance-based pays to employees with or without regard to the payroll period.
Supplemental compensation
This category of supplemental compensation is necessary to contain incentive pays and all other taxable employee benefits not classifiable as regular or supplemental compensation.
13th month pay and other benefits
What are the two examples of regular compensation?
Basic salary
Fixed allowances
How are fixed allowances received by the employee treated as?
inclusion to regular compensation
Fixed allowances are generally taxable. What are the exceptions?
- if for the employer’s trade
- expense is subject to accounting/liquidation
- excess advances are returned
Are variable and liquidated allowances subject to tax?
No
How are fees treated as?
Professional income
How are commissions to non-employees (like sales agents) treated as?
Business income by the sales agent
How are tips and gratuities treated as?
Other income of the employee
How is termination pay wherein the reason for termination is beyond the employee’s control treated as?
Addition to gross compensation income but deducted as non-taxable compensation.
What are the examples of supplementary compensation?
Overtime pay
Hazard pay
Holiday pay
NSD
Honoraria
Commissions
Emoluments
Fees
How are overtime, holiday, hazard and ND pay treated as?
Additional compensation income except for MWE
Commissions vs Emoluments vs Honoraria
Commissions - incentives to stimulate sales
Emoluments - any pay in general
Honoraria - additional payments for attending to special tasks
How are living quarters or meals treated as?
Included to compensation income
XPTN: the same was for the convenience or necessity of the employer or his business then it is exempt
This entitles employees to purchase shares of stocks of the employer at a pre-determined exercise price fixed on the grant date.
Equity-settled options
This entitles the employee to receive in cash the excess of the FV of stocks over the exercise price without actually delivering the stocks
Cash-settled options
What are the 2 types of options?
Equity-settled
Cash-settled
This is a reward for churning the business to post a profit. It can be enjoyed by individual employees. It is a compensation for controlling all the factors that influence profit.
Profit sharing
How are bonuses treated?
Additional compensation
XPTN: Linked to productivity under the productivity incentive plan of the employer then it is de minimis benefits
How is a productivity incentive linked to improvements in productivity treated as?
De minimis benefits
This is anchored on improvements in the factors of production and is usually enjoyed collectively by employees.
Productivity incentive
When is profit sharing payable?
Only when the business posts a profit
True or False: Productivity incentive is payable even if the business poses a loss.
True
What consists the 13th month pay of government employees?
Christmas bonus equivalent to one month salary plus a 5,000 cash gift
What consists the 13th month pay of private employees?
one month salary
How is Christmas bonus of private employees treated as?
Other benefits
How is Christmas bonus in the form of profit sharing be treated as?
Additional compensation income
How is Christmas gift of government employees treated as?
13th month pay and other benefits
Bonus vs Gift
Bonus - performance-based
Gift - gratuitous
This includes all other taxable fringe benefits not specifically included in the compensation income as regular, supplementary or 13th month pay, and other benefits under current tax rules.
Other fringe benefits
How are employee personal expenses, even if receipted in the name of the employer, when assumed or paid by the employer treated as?
Fringe benefits
The excess over the 90,000 of 13th month pay and other benefits is treated as?
taxable subject to withholding tax on compensation
How is the 5,000 Christmas gift of government employees treated as?
inclusion to 13th month pay and other benefits
What is the salary of MWE?
5,000 a month
or
60,000 per year
whichever is higher
When will MWEs be required to pay income tax?
when their total taxable income exceeds 250,000 a year
Are MWEs still exempt even if they are earning other taxable items of compensations other than their current employer?
Yes
How is a MWE taxed if an employee only becomes a MWE during the year?
The income before becoming a MWE is taxable. Income as a MWE is exempt.
How is a MWE taxed if he ceases to be a MWE during the year?
The income after being a MWE is taxable.
What is COLA?
Cost-ofLiving Allowance
How is COLA of MWEs treated as?
part of the minimum wage
What is the role of the employer in a withholding tax on compensation method?
Withholding agent
This is a method of collecting the income tax at source upon receipt of the income.
Withholding tax on compensation
How is under-withholding treated as?
Deducted on the final payroll of the employee
How is over-withholding treated as?
refunded to employee
When is the deadline of filing and remittance of the withholding tax on compensation?
the 10th day of the following month the withholding was made
True or False: Fixed allowances are part of regular compensation even if a portion of the allowances are actually used in the employer’s business.
True
