#AskTheTaxWhiz: Is it legal to deduct taxes from a contractual employee?

If so, how much is allowed to be withheld from my salary?

Mon Abrea
Published 2:47 PM, Dec 18, 2014
Updated 2:47 PM, Dec 18, 2014

I am currently working as a contractual Municipal Health Dentist in our

town for 3 years now. My monthly salary is P19,000 ($424.93*), net of
mandatory benefits. All of a sudden, they want to reduce it further by
withholding taxes. Is it legal to deduct taxes for a contractual employee?
If so how much is allowed to be withheld from my salary?
Yes. All gainfully employed individuals, whether full-time, part-time, or contractual
are subject to withholding tax on compensation. As part-time or contractual, you are
not allowed to claim personal or additional exemptions.
Using the revised withholding tax table, P3,708.25 ($82.93*) or at least 20%
effective tax rate will be withheld from your monthly salary.

If I will be considered as self-employed, will I be subject to the

bookkeeping requirements including the monthly Bureau of Internal
Revenue (BIR) compliance? What happens if the deadline falls on a
holiday?
Yes. You will be required to register with BIR and maintain the books of accounts,
including subsidiary books and other accounting records.
Deadlines which fall on weekends, holidays, and non-working days shall
automatically be moved to the next working day.
Are all taxpayers required to file annual income tax return? If I am a fulltime employee but I registered a small business with BIR, do I need to file
two separate income tax returns?
No. Only self-employed individuals, partnerships, and corporations are required to
file annual income tax return. Employees are exempted from filing income tax
returns.
No. For mixed income earners or those with compensation and business income
combined, they need to consolidate their income and file one annual income tax
return.
Got a question about taxes? #AskTheTaxWhiz! Tweet @rapplerdotcom or email us at
business@rappler.com. Rappler.com
Mon Abrea is a former BIR examiner and an advocate of genuine tax reform. He
serves as chief strategy officer of the countrys first social consulting enterprise, the
Abrea Consulting Group, which offers strategic finance and tax advisory services to
businesses and professionals. Mon's tax handbook, Got a Question About Taxes?
Ask the Tax Whiz! is now available in bookstores nationwide. Follow Mon on Twitter:
@askthetaxwhiz or visit his groups Facebook page. You may also email him at
consult@acg.ph.

$1 = P44.73