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Implementing regulations of Republic Act No. 9504

The BIR has issued Revenue Regulations No. 10-2008 (September 24, 2008) implementing the provisions of Republic Act (RA) No. 9504 relative to the income tax exemption of minimum wage earners and increase in the amount of personal and additional exemption allowances.

RR 10-08 does not provide for any retroactive effect, thus, the tax relief under RA 9504 shall be enjoyed starting only on July 06, 2008 which is the date of effectivity of the law.

1. Scope of income tax exemption of MWEs. The income tax exemption of minimum wage earners covers the statutory minimum wage, holiday pay, overtime pay, nigh-shift differential pay and hazard pay. However, if a MWE earns additional compensation such as commissions, honoraria, fringe benefits, benefits in excess of the allowable statutory amount of P30,000.00, taxable allowances and other taxable income, he/she shall no longer enjoy the privilege of being a MWE, and therefore, his/her entire earnings will be subject to income tax and consequently, from withholding tax.

2. Pro-rating of personal & additional exemption allowances - For CY 2008, the applicable personal and additional exemptions shall be prorated, as follows:

Personal exemptionJanuary 1 to July 5July 6 to December 31Total
 Single P10,000 P 25,000 P35,000
 Head of family 12,500 25,000 37,500
 Married 16,000 25,000 41,000
 Additional exemption for every QDC 4,000 12,500 16,500

For the period July 06 to December 31, 2008, a transitory withholding tax table shall be applied using the pro-rated personal and additional exemption allowances covering the period July 06 to December 31, 2008. Employers are required to undertake final year adjustments consolidating their employees’ compensation for 2008 taking into consideration the transitory exemption allowances.

2. Compliance requirements under RR 10-08. The regulation imposes new and additional compliance requirements which should be complied with to ensure that the employees receive the full benefits of the law, as follows:

1. Submission of list of MWEs receiving hazard pay – This should be attached to BIR Form 1601C for return periods March, June, September and December.

2. Submission of BIR Form 2305 for updating of exemption status – For Taxable Year 2008, employees with change in status and number of qualified dependent children shall accomplish BIR Form 2305, and submit the same together with the required documents/evidence of exemption to their employers not later than October 31, 2008. The original and duplicate copies of BIR Form 2305 together with the required attachments should be submitted to the BIR by the employer on or before November 28, 2008.

For those with no change of status and number of qualified dependents, the employer should be responsible for reflecting the new exemption allowances of their employees in their records.

The requirement to submit quarterly alphalist of MWEs contained under the draft regulations has been removed under RR 10-08.

Attached is a copy of RR 10-08 and pertinent annexes.

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