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Withholding tax on compensation
Withholding tax on compensation is the income tax the employer withholds from wages and remits to the Bureau of Internal Revenue. It is not SSS and it is not a company fee.
Also called WTC, payroll withholding
How it works
Use the BIR withholding table on taxable compensation after allowable exemptions and after subtracting the employee statutory shares that the table treats as pre-tax. TRAIN set the current bracket shape, including a zero band at the bottom and 35% at the top. Nonresidents and special cases have their own notes. A U.S. manager who ‘pays net’ without a withholding file has not made tax disappear. Someone still owes a computation. The local employer runs it monthly and issues Form 2316 after year-end. Philippine remote hiring makes this concrete because the worker is on a peso file while the manager sits in U.S. Slack. Write the rule into the contract and the payroll calendar before the first cutoff. Do not invent a U.S. substitute and hope DOLE never reads the payslip. Loaded cost moves when this line moves. The local employer, not the founder’s inbox, has to run the actual remittance or the actual notice.
Example: ₱60,000 monthly taxable-ish pay after employee SSS/PhilHealth/Pag-IBIG will not withhold like a U.S. W-2. Run the BIR table, do not apply California rates to pesos.
How it differs
Statutory contributions are benefit-fund remittances. TRAIN brackets are the rate schedule. Alphalist is the annual BIR summary.
Common errors
Withholding nothing because the offer was written in dollars. Grossing up without documenting the gross.