Individuals earning pure compensation income can expect to a higher take-home pay in 2023 this also includes non-business/non-profession related income and single proprietors
This is under the policy of Republic Act No. 10963 (RA No.10963), known as the Tax Reform for Acceleration and Inclusion Law (TRAIN Law) that took effect on January 1, 2018.
Under this particular RA, starting January 1, 2023, annual taxable income below Php 250,000.00 are exempt from paying personal income tax, while other taxpayers will have lower tax rates ranging from 15-30% by 2023. This does not apply for taxpayers with taxable income that exceeds the Php 8 million. For the top individual taxpayers whose annual taxable income that exceeds Php 8 million are to impose a higher tax rate of 35% more than the previous year tax rate of 32%.
The income tax on the individual’s taxable income shall be computed based on the following schedules. It is effective on January 1, 2023 and onwards:
Compared to the Income Tax rates imposed during the initial implementation of the TRAIN Law in 2018, the new annual income tax rates for individuals significantly decreased by 5% for those with taxable income of more than Php 250,000.00 up to Php 2,000,000.00, while a 2% decrease in tax rate was noted for individuals with taxable income of more than Php 2,000,000.00 up to Php 8,000,000.00.
According to Commissioner Romeo D. Lumagui, Jr., the said reduction in the annual income tax rates, individuals earning pure compensation income will have lower withholding tax deductions from their monthly salary, thereby increasing their take-home pay.
Effective on January 1, 2023 and onwards, employers shall use the Revised Withholding Tax Table for the computation of Withholding Taxes on Compensation Income of their employees that is provided in Annex E of Revenue Regulations No. 11-2018.