Republic Act 9504 – Tax Exemptions for Minimum Wage Earners and Increased Tax Exemptions

UPDATE (6/28/2008): The Bureau of Internal Revenue (BIR) has recently published its draft Revenue Regulation for the implementation of Republic Act 9504 (RA 9504).  It is also conducting a public hearing July 1, 2008 (Tuesday), 8:00 to 12:00 Noon at the BIR National Training Center Auditorium, BIR National Office Compound, Quezon City.

You can download the draft here (via RapidShare). Source: BIR

UPDATE (7/10/2008): Full text of RA 9504 is now posted here

(If you are copying this entire post please credit the author and the blog.)

IT’S NOW A LAW--President Gloria Macapagal-Arroyo shows off a copy of the Tax Relief for Minimum Wage Earners Act after she signed it into law Tuesday (June 17, 2008) at Malacanang\'s Reception Hall. With the President in photo are (standing, first row, from left) Senator Manuel Mar Roxas, Senator Juan Ponce Enrile, and Francis Escudero, Reps. Ma. Amelita Villarosa, Edcel Lagman, and Mary Anne Susano, House Speaker Prospero Nograles, and Rep. Exequiel Javier and other legislators. (Rey Baniquet/OPS-NIB Photo)

IT’S NOW A LAW–President Gloria Macapagal-Arroyo shows off a copy of the Tax Relief for Minimum WageEarners Act after she signed it into law Tuesday (June 17, 2008 ) at Malacanang’s Reception Hall. With the President in photo are (standing, first row, from left) Senator Manuel Mar Roxas, Senator Juan Ponce Enrile, and Francis Escudero, Reps. Ma. Amelita Villarosa, Edcel Lagman, and Mary Anne Susano, House Speaker Prospero Nograles, and Rep. Exequiel Javier and other legislators. (Rey Baniquet/OPS-NIB Photo)
Photo from the Office of the Press Secretary

President Gloria Arroyo has signed Republic Act 9504.  Its official title is, An Act Amending Sections 22, 24, 34, 35, 51 And 79 of Republic Act 8424, As Amended, Otherwise Known As The National Internal Revenue Code Of 1987.” This new law will exempt minimum wage earners from paying income tax, increasing tax exemption for all earners and additional exemptions for individuals with dependents/children.

This means that anyone earning at least the minimum wage in his/her region will not pay income tax.  The exemption extends to overtime pay, holiday pay, night shift differential and hazard pay of minimum wage earners only. Below is an quote from the law’s text:

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All individuals will have a maximum of P50,000 annual income tax exemption.  This simply means that a person earning a gross annual salary of P180,000 (excluding the mandatory 13th month pay, which is tax free) per year will only pay income tax on the P130,000.  The new exemption is for all persons whether single, married or head of the family.  In the old tax code, RA 8284 it gave single individuals only a P20,000 exception, head of families P25,000 and married individuals P32,000.

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For married couples, the new law increase the additional exemptions based on the number of their children. In the old law, each couple is allowed an exemption of P8,000 per child up to 4 children. The new law increases the exception to P25,000 per child up to 4 children.   Therefore, a family with four children will have a maximum exemption of P200,000.  It is a substantial increase from the previous P96,000 per family with four children.  In theory, a family with four children earning exactly or below P200,000 per year will not be subject to income tax.

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The law simply means more take home or net pay for minimum wage earners and lower taxes for the middle class.  This is a much welcomed relief from the higher cost of living.

The government, however, estimates a revenue loss of about P14 billion per year.  With the increased spending due to higher net pay VAT collections may offset the loss in revenue.

[The new act also changes how professionals or non employees pay their tax.   I personally don’t have knowledge on this particular item so I won’t attempt to discuss it.]

The new law will benefit income earners from this year (2008 ) onwards.  To be more specific, RA9504 Section 9 states that, “This Act shall take effect fifteen (15) days following its publication in the Official Gazette or in at least two (2) newspapers of general circulation.”

Please contact your respective employers on how they will adjust your withholding tax payment for 2008.

Below is an illustration on how it affects take home/net pay:

ciudadista.wordpress.com

Notes:

(1) The illustration will not apply to everybody’s case.  Please consult a licensed accountant, tax advisor or your human resources department to know how the new law will affect you specifically.

(2) The SSS, Pag-IBIG Fund and Philhealth contributions are based on a monthly salary of P15,000 per month.

(3) Statutory Exemption: In RA 8424 single income earners get only a P20,000 personal tax exemptions. RA 9504 grants a P50,000 tax exemption regardless of status.

(4) This is how the income tax is computed for single person as per RA8424 Chapter 3 Section 24 (see below):
Then: P22,500 + ((P150,550 – P140,000) x 25%)
Now: P8,500 + ((120,550 – P70,000) x 20%)

RA8424 Chapter 3 Section 24:

“The tax shall be computed in accordance with and at the rates established in the following schedule:

“Not over P10,000 –> 5%

“Over P10,000 but not over P30,000 –> P500+10% of the excess over P10,000

“Over P30,000 but not over P70,000 –> P2,500+15% of the excess over P30,000

“Over P70,000 but not over P140,000 –> P8,500+20% of the excess over P70,000

“Over P140,000 but not over P250,000 –> P22,500+25% of the excess over P140,000

“Over P250,000 but not over P500,000 –> P50,000+30% of the excess over P250,000

“Over P500,000 –> P125,000+34% of the excess over P500,000 in 1998

Please see the text of Senate Bill 2293 which has been signed into law and has become Republic Act 9504. Download/Read it here. Please check the Senate, House and Bureau of Internal Revenue(BIR) websites from time to time for the official text of the law.

Read the press release from the Office of the President here.

UPDATE (6/28/2008): The Bureau of Internal Revenue (BIR) has recently published its draft Revenue Regulation for the implementation of Republic Act 9504 (RA 9504).  It is also conducting a public hearing July 1, 2008 (Tuesday), 8:00 to 12:00 Noon at the BIR National Training Center Auditorium, BIR National Office Compound, Quezon City.

You can download the draft here (via RapidShare). Source: BIR

UPDATE (7/10/2008): Full text of RA 9504 is now posted here

Media Coverage:
Arroyo signs tax exemption measure for minimum wage earners (1:43 p.m.)
By Sun Star Network Online | June 17, 2008

Minimum wage earners get tax relief
By Michael Lim Ubac – Philippine Daily Inquirer | 06/18/2008

Tax relief package favors middle class, says Monsod
By Doris Dumlao – Philippine Daily Inquirer | 6/18/2008

GMA signs tax-exemption bill into law
By Mia M. Gonzales – Business Mirror | 6/18/2008

 

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Latest New Zealand Immigration Headlines

A Romney ewe with her two lambs.Image from Wikipedia

NZ Herald: Professional migrants face discrimination in NZ – study

Excerpt: Highly skilled immigrants struggle to find jobs in New Zealand because they come up against a wall of discrimination from both potential employers and recruitment consultants, a Massey University study has found.

The Wellington-based study by human resource management lecturer Jacqui Campbell and communication lecturer Mingsheng Li unearthed disturbing evidence that many new arrivals remained unemployed or accepted unskilled work because of racism. Read more here.

NZ Herald: [New Zealand’s] Open-door policy on migrants ‘a danger’

New Zealand First has suggested the door should be shut on Asian immigrants.

Deputy leader Peter Brown said yesterday that there was a danger Asian “mini-societies” were being built in New Zealand. Read more here.

NZ Herald: Flow of [New Zealand] migrants to Australia still big

Excerpt: The annual flow of New Zealand residents to live in Australia is the biggest since the middle of 2001.

Statistics New Zealand (SNZ) said a net 29,600 people migrated to Australia in the year to February, up from 22,200 in the February 2007 year. Read more here.

NZ Herald: MP’s Indian neighbours hit back at ‘racist’ claims

Excerpt: Fourteen-year-old Karamjit Singh lives in the same Tauranga street as New Zealand First MP Peter Brown.

But that’s about all he has in common with his neighbour.

The Otumoetai College student said he felt “put down” by Mr Brown’s comments this week about curbing Asian immigration. Read more here.

The 10 Unlikely Survivor Destinations or Themes

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1. Survivor: Payatas
Payatas in Quezon City is an infamous garbage dumpsite in Metro Manila. See how challengers sift their way through the stench and the filth.

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2. Survivor: Antarctica
Let us see how the tribes manage to live in the coldest pace on Earth.

800px-Philippinen_Basilan_seezigeuner_ph03p42
3. Survivor: Basilan
A province in the south of the Philippines known to be the hideout of an terrorist group. Tribes must out wit and outsmart each other and the bandits.

800px-Berg_Belucha
4. Survivor: Siberia
This place is not so cold as the South Pole but perhaps offering more vegetation.

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5. Survivor: The Sewers
The entire Survivor season will take place inside the sewer system of either Paris, London or New York.

Continue reading

Sir Edmund Hillary, first to climb Mt. Everest, passes away

Sir Edmund Hillary
(Photo taken by Graeme Mulholland)

photo of Sherpa Tenzing Norgay and Sir Edmund Hillary

Sir Edmund Hillary is New Zealand hero. He is the first person who climbed Mt. Everest with Sherpa Tenzing Norgay on May 29, 1953.

Besides climbing Mt. Everest he was a philanthropist helping the people of Nepal through the Himalayan Trust.

While he was living, his face is depicted on the New Zealand five dollar note. While I was in New Zealand, I was told an anecdote that when Sir Edmund was asked for ID he pulled-out a five dollar bill.

News reports:
Sir Edmund Hillary passes away – One News, Television New Zealand
Sir Edmund Hillary dies aged 88 – TV3 News, MediaWorks New Zealand
Sir Edmund Hillary dies – Stuff.co.nz
Latest updates: NZ mourns Sir Edmund- New Zealand Herald
Hillary tributes flood world’s media – New Zealand Herald
Everest legend Edmund Hillary dies – CNN.com
Sir Edmund Hillary dies aged 88 – BBC News
Everest conqueror Hillary dies at 88 – MSNBC.com

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Charter Change for Faster, Cheaper and Cleaner Elections (if computerization is not an option)

During election time in the Philippines I always hear people from all sides of the political spectrum and those “know-it-all” columnists, bloggers and pseudo experts that the Philippines conducts the slowest elections. These people also say that we need to modernize the elections.

Why is elections slow in the country besides the fact that it is manually counted? Its due to the fact that during synchronized national and local elections, people vote for a number of positions. For example during a presidential and local government elections in my city I would have to vote for the following: (the list is longer for those voting in provinces)

President (1)
Vice-President (1)
Senators (12)
Party List (1)
Congressman (1)
Mayor (1)
Vice-Mayor (1)
City Counselors (8)

In India during their national elections, thanks to their electoral/political system and their electronic voting machines, Indians only vote for their Member of Parliament nothing else.

To make elections faster in the Philippines there are only two options, modernize/computerize the election process or shift into a parliamentary political system to elect just an MP for the national parliament.

Details of immigration policy of the National Party

These are the highlights of the National Party’s immigration policy. It will only take effect if they win the election in September 17 this year.

  • A focus on skilled immigrants and giving greater recognition to those with proven work experience.
  • Immigrants will have to satisfy a good conduct requirement for four years before they can qualify for permanent residence. Those who break the criminal law will be sent home immediately.
  • Immigrants will not be able to qualify for welfare benefits for four years.
  • People sponsoring family to come to New Zealand will have to prove they can support them for the four-year benefit stand-down period.
  • The refugee quotas will be cut to the United Nations approved quota of 750, and savings will be reallocated to help refugees improve their English.
  • Investor Category immigrants will have to invest their money for a minimum of four years.
  • Business immigrants will have to create at least two permanent full-time jobs for non-family members.
  • The Immigration Service and the Citizenship Office will be merged.
    Source: Brash announces immigration policy 09/08/2005. National Party.
  • On a personal note, the proposal of National seems sensible but like what a friend had said it could confuse wannabe immigrants and go to other countries instead.

    Links:
    Nats tout immigrant benefit stand-down. 09/08/2005. Stuff.co.nz
    National sets out ‘disciplined’ immigration plan. 09/08/2005. NZ Herald.
    NZ Population close to static. 09/08/2005. NZ Herald.