{"id":3855,"date":"2016-12-29T10:00:52","date_gmt":"2016-12-29T02:00:52","guid":{"rendered":"http:\/\/primer.com.ph\/tips-guides\/?p=3855"},"modified":"2021-07-08T10:35:49","modified_gmt":"2021-07-08T02:35:49","slug":"expats-guide-to-tax-refund-in-the-philippines","status":"publish","type":"post","link":"https:\/\/primer.com.ph\/tips-guides\/2016\/12\/29\/expats-guide-to-tax-refund-in-the-philippines\/","title":{"rendered":"Expats’ Guide to Tax Refund in the Philippines"},"content":{"rendered":"

The end of 2016 is coming in two days. For most of us, it marks the end of a year filled with firsts. Employees typically laud this time of the year as it gives us more than the year-end parties and events: it\u2019s the time when we usually start computing for our annual tax refund (or lack thereof).<\/p>\n

This is, however, a very complicated topic, especially for those lying outside the realm of your company\u2019s accounting team. Here\u2019s an explainer on what tax refunds are, why they exist, and (most important) if and how you can collect it if you\u2019re a salaried employee.<\/p>\n

What is a tax refund?<\/strong><\/p>\n

A tax refund (specifically, an annual<\/em> tax refund) is defined as the \u201cexcess of tax withheld over the tax due on their annual gross income.\u201d Simply put, it\u2019s whatever excess tax your employer collected from you for the current year, if there is any.<\/p>\n

It comes as a result of any of these two things happening:<\/p>\n

    \n
  1. You\u2019re a new hire who\u2019s spent less than a year with your current company, hence leaving you with a little bit too much tax collected by your employer.<\/li>\n
  2. You\u2019ve changed your tax status (i.e. added a dependent, whether child or eligible family member) within the calendar year and have filed for a change of tax status with your employer.<\/li>\n<\/ol>\n

    Why does it exist?<\/strong><\/p>\n

    Taxes are what the government uses to pay for everything they spend on: infrastructure projects, housing, scholarships, etc. The two most obvious sources are the Value-Added Tax (VAT) they impose on products we purchase from stores and a portion of the income we make from our jobs.<\/p>\n

    If you\u2019re a salaried employee, you don\u2019t need to worry too much about how you may (or may not get it). It\u2019s enough to know that there are instances where your company takes away too much from your monthly pay because of the reasons stated above. There\u2019s also the element of human error (employees in accounting are people too), but that rarely happens.<\/p>\n

    No one wants to be taxed too much (remember all those movies about the Middle Ages?), so your employer submits a list of documents, called alphalists<\/em><\/a>, <\/em>to the Bureau of Internal Revenue (BIR).<\/p>\n

    How can we receive a tax refund?<\/strong><\/p>\n

    This one is easy enough to explain. If they deduct too much from your salary (which usually happens if you\u2019ve switched jobs or tax status), your employer has to give that money back to you on or before January 25.<\/strong> Too little, and you\u2019ll have to pay for those taxes by the end of January.<\/p>\n

    This means one thing: you MAY or MAY NOT receive a tax refund come payday on or before January 25.<\/p>\n

    In case you really want to know if you\u2019ll be receiving a tax refund or not, here\u2019s how it\u2019s (roughly) computed:<\/p>\n

    Get your Net Taxable Compensation. <\/em>Use the following formula for you to get your Total Taxable Compensation:<\/p>\n

    Total Taxable Compensation = (Annual basic pay + Overtime pay + 13th<\/sup> month pay + other taxable benefits) \u2013 (SSS + PhilHealth + PagIbig Contributions + Nontaxable allowance)<\/em><\/p>\n

    Once you have your Total Taxable Compensation, take away any exemptions you may have:<\/p>\n