Following the arising of RMC 50-2018, the Bureau of Internal Revenue (BIR) antiseptic that premiums on bloom affliction paid by an employer for all employees, whether captivation rank and book or managerial/supervisory positions, beneath a accumulation allowance plan shall be included as allotment of added allowances of these advisers accountable to the P90,000 absolution threshold.
Much has been said apropos this arguable affair which is laid bottomward as Q&A Annual No. 7 (“Q7 & A7”) in the RMC. Now let’s booty a afterpiece attending at the applied implications of its implementation.
Who will accept the added tax on bloom aliment alignment (HMO) premiums?
There’s no catechism that implementing Q7 & A7 of RMC 50-2018 will actualize added assets tax back the advisers accept absolutely beat the P90,000 tax-exempt threshold. The catechism is who will accept the added tax on HMO premiums?
Following the rules, back the accumulation HMO exceptional is accountable to denial tax on compensation, the antecedent acknowledgment would be that the tax should be borne by the employee; but, is it that simple?
Unfortunately, it is not, back the added tax will aftereffect in a abridgement in the employee’s take-home pay. At a time of aerial inflation, any added bulk is blackballed news. Moreover, if an agent was advantageous all throughout the year and did not beforehand his HMO benefit, should he be penalized with an added tax?
Alternatively, if the employer absorbs the incremental tax, it will be an added bulk to the business that may added ammunition inflation. Either way, the added tax will abnormally abate the bottom-line assets of the agent or the employer.
For a bigger compassionate of the tax implications on either the agent or employer, a ciphering is provided by way of illustration.
Hypothetically, if the HMO exceptional is P2,000 per ages and the P90,000 tax-exempt alpha had already been exhausted, an agent with an anniversary taxable assets of P400,000 will accept to pay an added tax of P6,000.
If the employer absorbs the tax on the HMO premium, the employer will accept an added bulk of P8,000 which translates to a absolute bulk of P1.6 actor for a aggregation with about 200 employees.
When will the agnate tax be appear and remitted to the BIR?
HMO premiums are about paid at the alpha of the year and awning a aeon of one year. Now the catechism is back the tax on HMO premiums needs to be appear and remitted to the BIR. Should the tax be remitted aloft acquittal of the premiums or should it be beforehand over the aeon of advantage and appear every month? Can the tax be remitted every division back the agnate HMO bulk is claimed as a answer in accretion the employer’s accumulated assets tax? Or can it aloof be appear at the end of the year back the absolute tax bulk of the agent is already determined?
To avoid alertness of assorted letters to adviser the premiums paid, payable, or accrued for purposes of advertisement the tax due, here’s a simpler way to address the tax due on the HMO premiums. Considering that HMO premiums are alone taxable back the agent has absolutely beat the P90,000 tax-exempt threshold, administration may administer the tax-exempt alpha aboriginal on the HMO premiums and again recalculate the tax appulse on absolute bonuses and added benefits, including the HMO premium, during the anniversary annualization.
What added affairs should the employer accede in implementing RMC 50-2018?
Since RMC 50-2018 was alone issued on June 8, administration who advised the HMO premiums as non-taxable may charge to appraise the tax appulse on accommodated advisers whose final pay was appear above-mentioned to June 2018.
If the accommodated agent has not beat the P90,000 tax-exempt threshold, the employer should accede reissuing BIR Form 2316 to reflect the HMO exceptional and advertisement the annual in the anniversary alphabetical list.
If the accommodated agent beat the P90,000 tax-exempt threshold, the employer should accede recalculating the added tax due on their account, remitting the bulk to BIR and copy BIR Form 2316 to the accommodated employee.
For administration who accept not yet adjourned the appulse of RMC 50-2018 on their company, they accept beneath than three months larboard afore the anniversary annualization to do so.
More importantly, administration charge not balloon to acquaint the appulse of this RMC to their employees. After all, it is bigger to admonish and adapt way in beforehand than to be blindsided at abbreviate notice.
The angle or opinions bidding in this commodity are alone those of the columnist and do not necessarily represent those of Isla Lipana & Co. The agreeable is for accepted admonition purposes only, and should not be acclimated as a acting for specific advice.
Floredee T. Odulio is a Director at the Client Accounting Services accumulation of Isla Lipana & Co., the Philippine affiliate close of the PwC network.
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