Photo from the Office of the Press Secretary
President Gloria Arroyo has signed Republic Act 9504. This new law will exempt minimum wage earners from paying income tax, increasing tax exemption for all earners and additional exemptions for individuals with dependents/children.
This means that anyone earning at least the minimum wage in his/her region will not pay income tax. The exemption extends to overtime pay, holiday pay, night shift differential and hazard pay of minimum wage earners only.
All individuals will have a maximum of P50,000 annual income tax exemption. This simply means that a person earning a gross annual salary of P180,000 (excluding the mandatory 13th month pay, which is tax free) per year will only pay income tax on the P130,000. The new exemption is for all persons whether single, married or head of the family. In the old tax code, RA 8284 it gave single individuals only a P20,000 exception, head of families P25,000 and married individuals P32,000.
For married couples, the new law increase the additional exemptions based on the number of their children. In the old law, each couple is allowed an exemption of P8,000 per child up to 4 children. The new law increases the exception to P25,000 per child up to 4 children. Therefore, a family with four children will have a maximum exemption of P200,000. It is a substantial increase from the previous P96,000 per family with four children. In theory, a family with four children earning exactly or below P200,000 per year will not be subject to income tax.
