This document summarizes key provisions from Republic Act 9504, which provides tax exemptions and increases deductions for minimum wage earners and taxpayers in general in the Philippines. It exempts all minimum wage earners from income tax, increases personal exemptions, allows corporations to claim an optional standard deduction of 40% of gross income, and increases the optional standard deduction for self-employed individuals to 40% of gross sales.

1. PROHIBITIONS
REGARDING WAGES
RUSSEL R. ROMERO

2. ART. 112 Non-Interference in Disposal of Wages
No employer shall limit or otherwise
interfere with the freedom of any
employee to dispose of his wages.
He shall not in any manner force,
compel, or oblige his employees to
purchase merchandise, commodities
or other property from any other
person, or otherwise make use of any
store or services of such employer or
any other person.

3. ART. 113 Wage Deduction
No employer, in his own behalf or in behalf of any
person, shall make any deduction from the wages
of his employees, except:
a. In cases where the worker is insured with his
consent by the employer, and the deduction is
to recompense the employer for the amount
paid by him as premium on the insurance.

4. ART. 113 Wage Deduction
b. For union dues, in cases where the right of the
worker or his union to check-off has been
recognized by the employer or authorized in
writing by the individual worker concerned; and
c. In cases, where the employer is authorized by
law or regulations issued by the Secretary of
Labor and Employment.

5. ART. 114 Deposits for Loss or Damage
No employer shall require his worker to make
deposits from which deductions shall be made
for the reimbursement of loss of or damage to
tools, materials, or equipment supplied by the
employer, except when the employer is
engaged in such trades, occupations or
business where the practice of making
deductions or requiring deposits is a
recognized one, or is necessary or desirable as
determined by the Secretary of Labor and
Employment in appropriate rules and
regulations.

6. ART. 115 Limitations
No deduction from the deposits of an employee for
the actual amount of the loss or damage shall be
made unless the employee has been heard thereon,
and his responsibility has been clearly shown.

7. ART. 116 Withholding of Wages and Kickbacks
Prohibited
It shall be unlawful for any person, directly or
indirectly, to withhold any amount from the wages
of a worker or induce him to give up any part of his
wages by force, stealth, intimidation, threat or by
any other means whatsoever without the worker’s
consent.

8. ART. 117 Deduction to Ensure Employment
It shall be unlawful to make any deduction from the
wages of any employee for the benefit of the
employer or his representative or intermediary as
consideration of a promise of employment or
retention in employment.

9. ART. 118 Retaliatory Measures
It shall be unlawful for an employer to refuse to
pay or reduce the wages and benefits, discharge or
in any manner discriminate against any employee
who has filed any complaint or instituted any
proceeding under this Title or has testified or is
about to testify in such proceedings.

10. ART. 119 False Reporting
It shall be unlawful for any person to make any
statement, report, or record filed or kept pursuant
to the provisions of this Code knowing such
statement, report or record to be false in any
material respect.

11. TAX EXEMPTION OF
MINIMUM WAGE
EARNERS
(RA 9504)

12. EXEMPTION FROM TAX OF THE
MINIMUM WAGE EARNERS
All minimum wage earners in the private and
public sector shall be exempt from payment of
income tax. The exemption will cover not only the
basic pay but also holiday pay, overtime pay, night
shift differential, and hazard pay received by the
minimum wage earners.

13. • Individual employees whose compensation income
does not exceed the statutory minimum wage or
P5,000 per month were exempted from withholding
tax. Nonetheless, these were not exempted from
income tax.
• The minimum wage earners whose compensation
were not subjected to withholding taxes were still
required to file annual income tax returns and pay
the corresponding income tax due.
EXEMPTION FROM TAX OF THE
MINIMUM WAGE EARNERS

14. • Minimum wage depends on the statutory minimum
wage fixed by the Regional Tripartite Wage and
Productivity Board, as defined by the Bureau of
Labor and Employment Statistics of the Department
of Labor and Employment.
• Regional Tripartite Wage and Productivity Boards of
each region determine the wage rates in the
different regions. The statutory minimum wage will
depend on the region where the employee is
working and not where he is residing.
EXEMPTION FROM TAX OF THE
MINIMUM WAGE EARNERS

15. • Minimum wage depends on the statutory minimum
wage fixed by the Regional Tripartite Wage and
Productivity Board, as defined by the Bureau of
Labor and Employment Statistics of the Department
of Labor and Employment. Regional Tripartite
Wage and Productivity Boards of each region
determine the wage rates in the different regions.
The statutory minimum wage will depend on the
region where the employee is working and not
where he is residing.
EXEMPTION FROM TAX OF THE
MINIMUM WAGE EARNERS

16. • RA 9504 increased the level of allowable personal
exemption of each individual taxpayer to a uniform
amount of P50,000 regardless of the status of the
taxpayer.
INCREASE IN PERSONAL AND
ADDITIONAL EXEMPTIONS
TYPE OF TAXPAYER OLD LAW NEW LAW
SINGLE 20,000 50,000
HEAD OF FAMILY 25,000 50,000
MARRIED INDIVIDUAL 32,000 50,000
ADDITIONAL EXEMPTION FOR EACH
QUALIFIED DEPENDENT/CHILD
8,000 25,000

17. • The OSD is a scheme whereby a taxpayer is given
the option to deduct from his gross revenue or
gross income a lump sum equivalent to a
percentage of such gross revenue or gross income
for purposes of computing the net taxable income
on which the income tax rate will be applied.
• This is in lieu of the itemized deduction scheme
where the taxpayer lists down all his expenses and
the corresponding amounts incurred to determine
the amount of allowable deductions.
OPTIONAL STANDARD DEDUCTION (OSD) FOR
CORPORATIONS AND INCREASED OSD FOR INDIVIDUALS

18. • The 10% OSD allowed to an individual engaged in
business and practice of profession was increased
to 40% of gross sales or gross receipts.
• Furthermore, corporations are now given the option
to avail of the OSD at 40% of gross income.
Previously, they were only allowed to claim itemized
deductions in computing their taxable net income.
OPTIONAL STANDARD DEDUCTION (OSD) FOR
CORPORATIONS AND INCREASED OSD FOR INDIVIDUALS

19. IMPLICATIONS OF
(RA 9504)

20. • The 10% OSD allowed to an individual engaged in
business and practice of profession was increased
to 40% of gross sales or gross receipts.
• Furthermore, corporations are now given the option
to avail of the OSD at 40% of gross income.
Previously, they were only allowed to claim itemized
deductions in computing their taxable net income.
COST OF LIVING ALLOWANCE (COLA) AND
VOLUNTARY SSS,PHIC & PAGIBIG CONTRIBUTIONS