Using a tax calculator in the Philippines would be a great way to know if you are paying less or more taxes. However, are you knowledgeable enough to know how to compute for your freelance taxes? If you are in search of new ways to have a lower annual tax bill, then you can do so by thinking ahead and being aware of the elements of tax computation to determine how you can consider saving money and paying less tax. Thanks to online tax calculators from the Philippines, you now have an easy step-by-step guide in knowing how your income taxes will affect your finances. Read on below to see if you are paying less taxes or more?
Elements of a Tax Calculator
With the new tax reform program, you would need to know the elements of a tax calculator. Aside from the wage and compensation benefits together with the government mandated benefits that we will discuss below, you have to take the primary elements of a tax calculator in account when computing for your tax in the Philippines. You will input your salary period, employment status, civil status, gross income, basic salary, and your taxable allowances. As a freelancer, you should treat this as basic knowledge since these are the most important factor in using a tax calculator.
Wage and Compensation Benefits
This category would include the 13th-month pay, overtime pay, night differential, and holiday pay. According to the Philippine Law, it is required that companies give their employers one month’s worth of their basic salary within the calendar year. If you are a freelancer in the Philippines, you should know that this is your inherent right but if you are employed by a foreign industry then you should inquire about the tax laws that include your employment. In the country, the law requires employers to give the 13th-month pay no later than December 24 every year.
You should also take overtime pay into consideration. Employees who render overtime should be given additional compensation that is equivalent to his regular wage plus at least a 25% premium. In addition to this, overtime pay for a holiday or rest day shall be paid an additional compensation from the rate of the first eight hours on a holiday or rest day plus at least 30%.
Government Mandated Benefits and Contributions
Whether you are a professional working as a freelancer for a local employer or a business owner who wants to ensure that your employees would get their rightful compensation, it is highly recommended that you should be knowledgeable about the standard wage and compensation, benefits, and mandatory individual contributions prescribed by the government.
There are the Social Security System (SSS) benefits, this includes compensation for medical services, appliances, supplies in an accredited hospital, rehabilitation services that include medical, surgical, and hospital treatment for workers who encounter work-related illnesses and injury.
Pag-IBIG benefits entitle employees to avail of Housing Loans, Calamity Loans, and Multi-Purpose Loans that will provide you with financial assistance to suit your needs. On the other hand, PhilHealth benefits will provide you with financial assistance for inpatient and outpatient hospitalization, as well as other benefit packages for patients undergoing long-term hospitalization and expensive treatments.
Key TakeawayKnowing these key elements in a tax calculator will pave the way for lesser tax deductions in your salary. This guide will help you get a grasp on the primary info regarding tax in the Philippines. Whether you are a fresh graduate looking for a job or a freelancer who will fax his or her income tax individually, then these are the things you need to know in using a tax calculator.