Payroll management in the Philippines relies heavily on the BIR tax table, which determines how employee income is taxed and reported. This table serves as a key reference for accurate salary calculations and compliance with Bureau of Internal Revenue regulations.
For HR teams, accountants, and business owners, understanding the BIR tax table is essential for applying the correct withholding tax rates. It also requires awareness of tax frameworks such as the TRAIN Law, which continues to shape payroll taxation.
As tax regulations change, businesses must follow updated BIR guidelines. For example, BIR Revenue Regulation No. 5 updates withholding tax rates under the National Internal Revenue Code.
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Key Takeaways
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What Is the BIR Tax Table and Why Is It Crucial for Your Business?
The Bureau of Internal Revenue (BIR) tax table is a fundamental tool for every business in the Philippines, serving as the official guide for calculating the withholding tax on employee compensation.
This graduated table outlines different tax rates that apply to various levels of taxable income. For business owners, managers, and HR professionals, this table is not merely a reference but a critical component of payroll management and legal compliance.
Properly utilizing the BIR tax table directly impacts several core areas of your business operations, extending far beyond simple calculations. It is the bedrock of ensuring regulatory finance oversight, which protects your company from potential penalties and legal issues.
Furthermore, accurate payroll processing, guided by this table, fosters trust and transparency with your employees, positively affecting morale and retention. A clear grasp of these tax brackets also aids in strategic financial planning.
Understanding the Graduated BIR Tax Table (Effective 2023-2024)
The current tax system in the Philippines is based on the TRAIN Law, which introduced a revised graduated earnings summary tax table. This table adjusts brackets and rates to provide relief for lower-income earners and is applied progressively.
For businesses, applying the current tax table correctly is essential for accurate payroll processing. It determines the withholding tax deducted from employees’ salaries, which must be remitted to the BIR.
1. How to read the tax table
To use the BIR tax table, calculate the employee’s taxable income by subtracting non-taxable benefits and mandatory contributions. Find the corresponding bracket to see the fixed tax amount plus the percentage applied to the excess over the lower limit.
2. Sample computation for 2024
For example, an employee earning ₱45,000 falls in the “Over ₱33,333 but not over ₱66,667” bracket. Calculate the excess: ₱45,000 – ₱33,333 = ₱11,667. Apply 20%: 0.20 × ₱11,667 = ₱2,333.40. Add the fixed amount ₱2,083.33 → total tax = ₱4,416.73.
Upcoming Changes: The BIR Tax Table for 2026 and Beyond
As part of the TRAIN Law’s phased implementation, new individual income tax rates will take effect on January 1, 2026. The 2026 tax table lowers rates across most brackets, aiming to simplify the system and increase employees’ disposable income.
Businesses need to prepare for these changes to ensure accurate payroll. Existing systems and formulas must be updated to prevent over-withholding and avoid refunds, while also allowing communication of the positive impact on take-home pay.
1. Key differences between the 2024 and 2026 tables
The main change is lower tax rates for several brackets. For example, income over ₱250,000 up to ₱400,000 drops from 20% to 15%, with similar reductions for higher brackets. This completes the TRAIN Law personal income tax reform.
2. What these changes mean for employee take-home pay
Lower rates mean higher net pay. An employee earning ₱45,000 monthly will have smaller deductions, leaving more disposable income, improving financial well-being and job satisfaction.
3. How businesses should prepare for the 2026 transition
Finance and HR teams should review payroll systems to ensure they can apply the new rates. Companies should also communicate the changes to employees and use this period to audit payroll processes and strengthen internal controls.
Beyond Income Tax: Mandatory Employee Contributions
While the BIR tax table determines employee income tax, a complete payroll also requires accurate deduction and remittance of mandatory contributions. These include SSS, PhilHealth, and Pag-IBIG, which provide social security, healthcare, and housing benefits. Timely remittance is legally required, with penalties for non-compliance.
These contributions are calculated based on an employee’s monthly salary and shared between employers and employees. Integrating them into payroll ensures correct net pay and transparency, reinforcing your company’s commitment to employee welfare.
1. Social Security System (SSS) contributions
SSS provides retirement, disability, sickness, maternity, and death benefits. Contributions are based on monthly salary credits and split between employers and employees. Staying updated with the official SSS website schedule is essential.
2. Philippine Health Insurance Corporation (PhilHealth) contributions
PhilHealth ensures access to affordable healthcare. Premiums are a percentage of basic salary, shared by employer and employee, with an income floor and ceiling. Regular updates must be monitored for accurate deductions.
3. Pag-IBIG Fund contributions
The official Pag-IBIG website supports housing loans for employees. Contributions are a small percentage of the monthly salary, shared by employers and employees. Tracking official rates is key to compliant payroll management.
Automating Compliance: How an Integrated System Simplifies Tax Management
Manually calculating withholding taxes and contributions is time-consuming and prone to errors. Changing tax tables, contribution rates, and employee details increases the risk of non-compliance with BIR, SSS, PhilHealth, and Pag-IBIG, especially as the workforce grows.
Leveraging an integrated HR and accounting system automates payroll, applying the correct BIR tax table, calculating all mandatory contributions, and generating accurate payslips. This reduces errors and ensures compliance while improving operational efficiency.
1. Centralized employee data management
A modern system stores all employee data, personal info, salaries, attendance, and leave, in a single database. Payroll is processed automatically using the most up-to-date information, eliminating manual entry and data inconsistencies.
2. Automated payroll and tax calculations
Payroll software automates complex calculations, updates BIR tax tables and contribution schedules, and adjusts for bonuses, overtime, and other pay elements. It also generates necessary forms like the BIR tax credit certificate.
3. Seamless financial reporting and compliance
Automated systems produce payroll summaries, remittance reports, and annual tax forms for audits and decision-making. Integration with accounting ensures accurate general ledger entries, simplifying financial tracking and reporting.
Conclusion
Understanding the BIR tax table and mandatory employee contributions is crucial for Philippine businesses. Staying compliant with the 2023-2024 rates and preparing for 2026 adjustments ensures operational stability and builds employee trust.
Manual payroll is error-prone and time-consuming, especially with a growing workforce. Calculating taxes and contributions for each employee is risky, while automation centralizes data, speeds calculations, and ensures compliance.
Automated payroll solutions save time, reduce mistakes, and support business growth. Companies can also offer guidance through a free consultation to help employees and teams navigate upcoming tax changes.
Frequently Asked Questions
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What is the TRAIN Law and how does it affect the tax table?
The TRAIN (Tax Reform for Acceleration and Inclusion) Law is a landmark tax reform package that revised the personal income tax system in the Philippines. It introduced a new, more progressive graduated tax table with lower rates for most taxpayers, which is being implemented in phases. The first phase was from 2018-2022, the second is from 2023-2024, and the final phase with further reduced rates will begin in 2026.
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Are bonuses and 13th-month pay taxable?
Under the TRAIN Law, the 13th-month pay and other benefits, including productivity incentives and Christmas bonuses, are non-taxable up to a maximum amount of ₱90,000. Any amount exceeding this threshold is considered taxable income and will be subject to the corresponding tax rate based on the graduated BIR tax table.
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What happens if my company uses the wrong tax table for payroll?
Using an incorrect or outdated tax table can lead to significant compliance issues. If you under-withhold taxes, your company may face penalties and interest charges from the BIR. If you over-withhold, it can lead to employee dissatisfaction and the administrative task of correcting the error and processing refunds, which can be complex.
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How often is the BIR tax table updated?
Major updates to the BIR tax table are typically driven by new legislation, such as the TRAIN Law. While the core structure is now set through 2026, the government can propose new tax laws in the future that may alter it. However, minor administrative rules and regulations related to taxation can be updated more frequently by the BIR.
