Payroll, HR & labor compliance
Withholding tax on compensation in the Philippines: 2026 tables and examples
The BIR withholding tax tables on compensation (monthly, semi-monthly and annual), what is taxable, and a step-by-step computation for Philippine payroll.
Employers in the Philippines withhold income tax from employees' compensation every payroll using the BIR withholding tax table. The table that applies in 2026 is the one that took effect on January 1, 2023 under the TRAIN Law (RA 10963). Annual taxable compensation of ₱250,000 or less is tax-exempt, and rates rise from 15% to 35% on higher income.
As of this review, no newer compensation tax table has been issued. Confirm with the BIR before each new year's payroll.
Annual income tax table (2023 onwards)
| Annual taxable compensation | Tax due |
|---|---|
| ₱250,000 and below | 0 |
| Over ₱250,000 to ₱400,000 | 15% of the excess over ₱250,000 |
| Over ₱400,000 to ₱800,000 | ₱22,500 + 20% of the excess over ₱400,000 |
| Over ₱800,000 to ₱2,000,000 | ₱102,500 + 25% of the excess over ₱800,000 |
| Over ₱2,000,000 to ₱8,000,000 | ₱402,500 + 30% of the excess over ₱2,000,000 |
| Over ₱8,000,000 | ₱2,202,500 + 35% of the excess over ₱8,000,000 |
Monthly withholding tax table
| Monthly taxable compensation | Withholding tax |
|---|---|
| ₱20,833 and below | 0 |
| ₱20,833 to ₱33,332 | 15% of the excess over ₱20,833 |
| ₱33,333 to ₱66,666 | ₱1,875 + 20% of the excess over ₱33,333 |
| ₱66,667 to ₱166,666 | ₱8,541.80 + 25% of the excess over ₱66,667 |
| ₱166,667 to ₱666,666 | ₱33,541.80 + 30% of the excess over ₱166,667 |
| ₱666,667 and above | ₱183,541.80 + 35% of the excess over ₱666,667 |
Semi-monthly withholding tax table
| Semi-monthly taxable compensation | Withholding tax |
|---|---|
| ₱10,417 and below | 0 |
| ₱10,417 to ₱16,666 | 15% of the excess over ₱10,417 |
| ₱16,667 to ₱33,332 | ₱937.50 + 20% of the excess over ₱16,667 |
| ₱33,333 to ₱83,332 | ₱4,270.70 + 25% of the excess over ₱33,333 |
| ₱83,333 to ₱333,332 | ₱16,770.70 + 30% of the excess over ₱83,333 |
| ₱333,333 and above | ₱91,770.70 + 35% of the excess over ₱333,333 |
The BIR also publishes daily and weekly tables. Use the table that matches your payroll frequency.
What is taxable compensation?
Withholding tax applies to taxable compensation, not gross pay. Start from gross compensation for the period and subtract:
- Mandatory employee contributions to SSS, PhilHealth and Pag-IBIG, and union dues where applicable
- De minimis benefits within the BIR ceilings (see de minimis benefits)
- 13th month pay and other benefits up to the ₱90,000 annual exemption (see 13th month pay)
- Compensation of minimum wage earners, including their holiday, overtime, night differential and hazard pay, which is exempt
Step-by-step example: monthly payroll
An employee earns a monthly basic salary of ₱40,000 with no other taxable earnings this month.
- SSS employee share: compensation is above the maximum MSC, so ₱1,750.
- PhilHealth employee share: 5% × ₱40,000 ÷ 2 = ₱1,000.
- Pag-IBIG employee share: ₱200.
- Taxable compensation: ₱40,000 − ₱1,750 − ₱1,000 − ₱200 = ₱37,050.
- Apply the monthly table: ₱37,050 falls in the ₱33,333 to ₱66,666 bracket. Tax = ₱1,875 + 20% × (₱37,050 − ₱33,333) = ₱1,875 + ₱743.40 = ₱2,618.40.
For a semi-monthly payroll, apply the semi-monthly table to each cutoff's taxable compensation, or follow your approved method for employees whose pay varies between cutoffs.
Withholding is an estimate: annualization in December
Per-cutoff withholding assumes the employee earns the same amount all year. Bonuses, salary changes, unpaid leave and mid-year hires break that assumption. At year-end (or at separation), employers annualize: compute the tax due on the year's total taxable compensation using the annual table, compare it with the tax withheld, then withhold the shortfall or refund the excess. Read year-end tax annualization for the full process.
The result is reported on BIR Form 2316, and monthly remittances are filed on BIR Form 1601-C.
Common withholding tax mistakes
- Taxing gross pay instead of taxable compensation
- Using the wrong table for the payroll frequency
- Treating the full 13th month pay as taxable, or forgetting the excess over ₱90,000
- Not applying minimum wage earner exemptions correctly
- Skipping annualization for employees who resign mid-year
How payroll software should handle withholding tax
The tax tables should be configurable with effective dates, the system should show the taxable compensation breakdown per employee, and annualization should run from the same data. Cirquolus Payroll includes withholding tax workflows, 13th month pay, annualization and payroll approvals.
Frequently asked questions
Is there a new BIR withholding tax table for 2026?
As of October 2026 the table effective January 1, 2023 still applies. Check BIR issuances for any change before each year's first payroll.
How much salary is tax-free in the Philippines?
Annual taxable compensation of ₱250,000 or less is exempt, equivalent to about ₱20,833 a month of taxable compensation.
Are SSS, PhilHealth and Pag-IBIG deducted before tax?
Yes. Mandatory employee contributions are subtracted from gross compensation before applying the withholding tax table.
Are minimum wage earners subject to withholding tax?
No. Statutory minimum wage earners are exempt on their minimum wage and on holiday, overtime, night shift differential and hazard pay. Other taxable earnings above the exemptions may still be taxed, so check current BIR rules.
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