Posted by: Elmer Brabante | November 10, 2009

Additional Personal Exemptions Act [RA 9504]


REPUBLIC ACT No. 9504 

An Act Amending Sections 22, 24, 34, 35, 51 and 79 of Republic Act No. 8424, as Amended, Otherwise Known as the National Internal Revenue Code of 1987. 

Section 1.  Section 22 of Republic Act No. 8424, as amended, otherwise known as the National Internal Revenue Code of 1997, is hereby further amended by adding the following definition after Subsection (FF) to read as follows:  

“Sec. 22 Definitions.  – When in this Title:

“(A)  x  x  x

“x  x  x

“(FF) x  x  x

“(GG)”  The term ‘statutory minimum wage’ shall refer to the rate fixed by the Regional Tripartite Wage and Productivity Board, as defined by the Bureau of Labor and Employment Statistics (BLES) of the Department of Labor and Employment (DOLE).

“(HH)” The term ‘minimum wage earner’ shall refer to a worker in the private sector paid the statutory minimum wage, or to an employee in the public sector with compensation income of not more than the statutory minimum wage in the non-agricultural sector where he/she is assigned.” 

Sec. 2.  Section 24(A) of Republic Act No. 8424, as amended, otherwise known as the National Internal Revenue Code of 1997, is hereby further amended to read as follows:  

“Sec. 24.  Income Tax Rates. – 

“(A)” Rates of Income Tax on Individual Citizen and Individual Resident Alien of the Philippines. – 

“(1)  x  x  x

“x  x  x; and

“(c) On the taxable income defined in Section 31 of this Code, other than income subject to tax under Subsections (B), (C) and (D) of this Section, derived for each taxable year from all sources within the Philippines by an individual alien who is a resident of the Philippines.

“(2)  Rates of Tax on Taxable Income of Individuals.  – The tax shall be computed in accordance with and at the rates established in the following schedule: 

“Not over P10,000 …………………………………… 5%

“Over P10,000 but not over P30,000 ………P500 + 10% of excess over P10,000

“Over P30,000 but not over P70,000 ………P2,500 + 15% of the excess over P30,000

“Over P70,000 but not over P140,000 ……P8,500 + 20% of the excess over P70,000

“Over P140,000 but not over P250,000 …P22,500 + 25% of the excess over P40,000

“Over P250,000 but not over P500,000 …P50,000 + 30% of the excess over P250,000

“Over P500,000 ………………………………………P125,000 + 32% of the excess over P500,000 

“For married individuals, the husband and wife, subject to the provision of Section 51(D) hereof, shall compute separately their individual income tax based on their respective total taxable income:  Provided, That if any income cannot be definitely attributed to or identified as income exclusively earned or realized by either of the spouses, the same shall be divided equally between the spouses for the purpose of determining their respective taxable income.

“Provided, That minimum wage earners as defined in Section 22(HH) of this Code shall be exempt from the payment of income tax on their taxable income:  Provided, further, That the holiday pay, overtime pay, night shift differential pay and hazard pay received by such minimum wage earners shall likewise be exempt from income tax. 

Sec. 3.  Section 34 (L) of Republic Act No. 8424, as amended, otherwise known as the National Internal Revenue Code of 1997, is hereby amended to read as follows: 

“Sec. 34.  Deductions from Gross Income. – Except for taxpayers earning compensation income arising from personal services rendered under an employer-employee relationship where no deductions shall be allowed under this Section other than under Section (M) hereof, in computing taxable income subject to income tax under Sections 24(A); 25(A); 26; 27(A), (B) and (C); and 28(A)(1) there shall be allowed the following deductions from gross income:

“(A)  Expenses. – 

“x  x  x

“(L) Optional Standard Deduction. – In lieu of the deductions allowed under the preceding Subsections, an individual subject to tax under Section 24, other than nonresident alien, may elect a standard deduction in an amount not exceeding forty percent (40%) of his gross sales or gross receipts, as the case may be.  In the case of a corporation subject to tax under Sections 27(A) and 28(A)(1), it may elect a standard deduction in an amount not exceeding forty percent (40%) of its gross income as defined in Section 32 of this Code.  Unless the taxpayer signifies in his return his intention to elect the optional standard deduction, he shall be considered as having availed himself of the deductions allowed in the preceding Subsections.  Such election when made in the return shall irrevocable for the taxable year for which the return is made.  Provided, That an individual who is entitled to an claimed for the optional standard deduction shall not be required to submit with his tax return such financial statements otherwise required under this Code:  Provided, further, That except when the Commissioner otherwise permits the said individual shall keep such records pertaining to this gross sales or gross receipts, or the said corporation shall keep such records pertaining to this gross income as defined in Section 32 of this Code during the taxable year, as may be required by the rules and regulations promulgated by the Secretary of Finance, upon recommendation of the Commissioner.  

Sec. 4.  Section 35(A) and (B) of Republic Act No. 8424, as amended, otherwise known as the National Internal Revenue Code of 1997, is hereby amended to read as follows: 

“Sec. 35.  Allowance of Personal Exemption for Individual Taxpayer. – 

“(A)  In General. – For purposes of determining the tax provided in Section 24(A) of this Title, there shall be allowed a basic personal exemption amounting to Fifty thousand pesos (P50,000) for each individual taxpayer.

“In the case of married individuals where only one of the spouse is deriving gross income, only such spouse shall be allowed the personal exemption.

“(B)  Additional Exemption for Dependents. – There shall be allowed an additional exemption of Twenty-five thousand pesos (P25,000) for each dependent not exceeding four (4).

“The additional exemption for dependents shall be claimed by only one of the spouses in the case of married individuals.

“In the case of legally separated spouses, additional exemptions may be claimed only by the spouse who has custody of the child or children: Provided, That the total amount of additional exemptions that may be claimed by both shall not exceed the maximum additional exemptions herein allowed. 

“For purposes of this Subsection, a ‘dependent’ means a legitimate, illegitimate or legally adopted child chiefly dependent upon and living with the taxpayer if such dependent is not more than twenty-one (21) years of age, unmarried and not gainfully employed or if such dependent, regardless of age, is incapable of self-support because of mental or physical defect.

Sec. 5.  Section 51(A)(2) of Republic Act No. 8424, as amended, otherwise known as the National Internal Revenue Code of 1997, is hereby further amended to read as follows:

“Sec. 51.  Individual Return. – 

“(A)  Requirements. – 

“(1)  Except as provided in paragraph (2) of this Subsection, the following individuals are required to file an income tax return:

“(a) x  x  x;

“x  x  x.

“(2)  The following individuals shall not be required to file an income tax return:

“(a) x  x  x;

“(b)  An individual with respect to pure compensation income, as defined in Section 32(A)(1), derived from sources within the Philippines, the income tax on which has been correctly withheld under the provisions of Section 79 of this Code:  Provided, That an individual deriving compensation concurrently from two or more employers at any time during the taxable year shall file an income tax return:

“(c) x  x  x; and

“(d)  A minimum wage earner as defined in Section 22(HH) of this Code or an individual who is exempt from income tax pursuant to the provisions of this Code and other laws, general or special. 

Sec. 6.  Section 79(A) of Republic Act No. 8424, as amended, otherwise known as the National Internal Revenue Code of 1997, is hereby further amended to read as follows: 

“Sec. 79.  Income Tax Collected at Source. – 

“(A)  Requirement of Withholding. – Except in the case of a minimum wage earner as defined in Section 22(HH) of this Code, every employer making payment of wages shall deduct and withhold upon such wages a tax determined in accordance with the rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner. 

Sec. 7.  Separability Clause.  – If any provision of this Act is declared invalid or unconstitutional, other provisions hereof which are not affected thereby shall continue to be in full force and effect.  

Sec. 8.  Repealing Clause. – Any law, presidential decree or issuance, executive order, letter of instruction, administrative order, rule or regulation contrary to or inconsistent with any provision of this Act is hereby amended or modified accordingly.  

Sec. 9.  Effectivity Clause.  – This Act shall take effect fifteen (15) days following its publication in the Official Gazette or in at least two (2) newspapers of general circulation.  

Approved: June 17, 2008

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Responses

  1. Hi. I’m impressed by your research. What about paternity leave benefits. Is there an exemption especially for a start-up (less than 6 months) service establishment like ours? What other benefits do start-up employers in the NCR of less than 15 employees have?

    More power to you. thanks.

  2. Are non-resident citizens ENGAGED in trade or business in the Philippines allowed to deduct ADDITIONAL EXEMPTION or DEDUCTION?

  3. Yes, with respect to its income from within the Philippines.

  4. if I give birth during the taxable year, can my husband claim additional exemption in full or is it pro rated??

  5. If my child is already 21 years old last December 8, 2011 and would soon be 22 years old comes December 8, 2012, could I still include her as my additional dependent this year and claim the 25,000.00 personal exemption?

    • @LOurde S. Ador.

      YES. You are still entitled for the additional exemption.

  6. Hi.. can a single parent(not a legally separated spouse) with his child born out of wedlock can claim or is entitled for an additional personal exemption of P25,000 or max of P100,000 for 4 qualified dependents? Thanks.

    • Yes he/ se can claim as long as the dependent qualifies as a dependent under the Income Tax law.

    • The father, as the general rule can claim the the additional exemptions up to 4 dependents (legitimate,illegitimate,legally adopted)
      or up to Php 100,000.00 if he didn’t waived his right to enjoy the additional exemption in favor of his wife on those dependents. Dependent means not over 21 years old, not married, not employed, and physically or mentally challenged that cannot stand to be dependent on his own. If the father waived his right, the wife will have to include it as her own exemption provided that the qualification to be dependent is satisfied.

      • Correction: Dependent means not over 21 years old, not married, not employed, and physically or mentally challenged that cannot stand to be INDEPENDENT on his own.

  7. Hi… can a Senior Citizen living with a taxpayer be qualified as a “dependent”?

    • No. Supporting a senior citizen will only qualify a single or legally separated individual with no qualified dependent as head of the family (HF). But hence we do not have HF now under RA 9504, it is immaterial whether the the senior citizen is living with the taxpayer. Besides, there is no additional exemption of P25,000 for a senior citizen because that privilege is only for children. (legitimate, illegitimate or legally adopted child/children)

      • won’t Sec.5(a) of The Senior Citizen’s Act, (REPUBLIC ACT NO. 7432 as Amended by Republic Act No. 9994) qualify the Senior Citizen as a dependent for purposes of availing the Additional Personal Exemption?
        Sec. 5 (a) provides:
        “Sec. 5 (a) The senior shall be treated as dependents provided for in the National Internal Revenue Code and as such, individual taxpayers caring for them, be they relatives or not shall be accorded the privileges granted by the Code insofar as having dependents are concerned. ”

        Thanks in advance.

  8. On the comment of Mark:
    Yes I will still provide for them the additional exemption for dependents since RA 7432 is a specific law providing particular provisions whereas RA9504 is a general law. The statutory construction that strictly construe the tax exemption against the taxpayer shall not apply because the spirit of RA 7432 provides for the relief of those caring for the senior citizens as their dependent. RA 9504 is silent and does not provide for senior citizens as a dependent but nonetheless a harmonious interpretation between the two law is in order and their mutual application shall not contradict the overall purpose of both laws.

    Of course unless this case is decided by the SC all of these squabbles shall only be persuasive. Trust me for 5 years now, this has been my dilemma. So as a taxpayer I am going to claim exemptions for my senior citizens!

  9. Can an employed wife whose husband is working abroad automatically claim additional personal exemption of P25,000.00 per depdendent?

  10. What is meant by Taxable Year? I have a child born on December 31, 2012. Can I claim additional tax exemption for 2012? Thanks…

    • Yes, you can. Under the tax code changes in the additional exemption can be claimed in full in the year of change.

    • Taxable year, the year which will be the basis for income tax filing….

  11. if you are single no child, can you claim additional personal exemption for your 63 yo father?

  12. No. Supporting a senior citizen will only qualify a single or legally separated individual with no qualified dependent as head of the family (HF). But hence we do not have HF now under RA 9504, it is immaterial whether the the senior citizen is living with the taxpayer. Besides, there is no additional exemption of P25,000 for a senior citizen because that privilege is only for children. (legitimate, illegitimate or legally adopted child/children)


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