Short answer: Philippine withholding tax on salary is the income tax your employer deducts from your pay and remits to the BIR. For 2026, employees still use the TRAIN law income tax schedule effective January 1, 2023 onward: annual taxable income up to PHP 250,000 is taxed at 0%, then higher brackets use 15%, 20%, 25%, 30%, and 35% rates.

The number on your payslip is not based on gross salary alone. Payroll first removes non-taxable items such as mandatory employee contributions to SSS, PhilHealth, Pag-IBIG, and union dues, then applies the BIR withholding table to taxable compensation. For quick math, use the Withholding Tax Calculator Philippines.

Jump to a Section

• 2026 withholding tax rules at a glance
• What counts as taxable compensation
• 2026 annual tax table
• Monthly withholding tax table
• Sample computations
• 13th month, bonuses, and overtime
• Year-end adjustment and tax refund
• Common payroll mistakes
• FAQs

1. 2026 Withholding Tax Rules at a Glance

The withholding system exists so employees do not pay one huge income tax bill at the end of the year. Employers compute the tax, deduct it from salary, and remit it using BIR compensation withholding returns such as BIR Form 1601-C.

Item	2026 rule	Plain-English meaning
Tax-free annual bracket	PHP 250,000	Taxable compensation up to this amount has 0% income tax
Top tax rate	35%	Applies only to the highest bracket above PHP 8,000,000 annually
Mandatory contributions	Generally non-taxable	Employee share of SSS/GSIS, PhilHealth, Pag-IBIG, and union dues reduces taxable pay
13th month and benefits ceiling	PHP 90,000	Excess over the ceiling becomes taxable
Final check	Year-end adjustment	Employer reconciles total annual tax versus tax withheld

2. What Counts as Taxable Compensation

BIR’s withholding calculator separates compensation into regular compensation, supplementary compensation, and non-taxable or exempt compensation. This distinction matters when bonuses, commissions, overtime, or taxable allowances appear in the same payroll period.

• Regular compensation: basic salary and fixed allowances paid per payroll period.
• Supplementary compensation: commissions, taxable bonuses, taxable 13th month excess, honoraria, and other extra pay.
• Non-taxable compensation: mandatory employee contributions, qualified de minimis benefits, and exempt income under BIR rules.
• Minimum wage earners: special exemption rules can apply, especially for statutory minimum wage and certain holiday, overtime, night shift, and hazard pay.

For a line-by-line payroll view, read PH Payslip Explained Line by Line. For government contributions, compare with the SSS Contribution Guide, PhilHealth Contribution Guide, and Pag-IBIG Contribution Guide.

3. 2026 Annual Income Tax Table

Republic Act No. 10963, the TRAIN law, provides the individual income tax schedule effective January 1, 2023 onward. This is the annual tax table behind 2026 payroll withholding.

Annual taxable income	Income tax due
Not over PHP 250,000	0%
Over PHP 250,000 to PHP 400,000	15% of excess over PHP 250,000
Over PHP 400,000 to PHP 800,000	PHP 22,500 + 20% of excess over PHP 400,000
Over PHP 800,000 to PHP 2,000,000	PHP 102,500 + 25% of excess over PHP 800,000
Over PHP 2,000,000 to PHP 8,000,000	PHP 402,500 + 30% of excess over PHP 2,000,000
Over PHP 8,000,000	PHP 2,202,500 + 35% of excess over PHP 8,000,000

4. Monthly Withholding Tax Table

For monthly payroll, the annual table is translated into monthly thresholds. This is why many employees see zero withholding tax if monthly taxable compensation is around PHP 20,833 or lower.

Monthly taxable compensation	Monthly withholding tax
PHP 20,833 and below	PHP 0
Over PHP 20,833 to PHP 33,333	15% of excess over PHP 20,833
Over PHP 33,333 to PHP 66,667	PHP 1,875 + 20% of excess over PHP 33,333
Over PHP 66,667 to PHP 166,667	PHP 8,541.67 + 25% of excess over PHP 66,667
Over PHP 166,667 to PHP 666,667	PHP 33,541.67 + 30% of excess over PHP 166,667
Over PHP 666,667	PHP 183,541.67 + 35% of excess over PHP 666,667

5. Sample Monthly Withholding Tax Computations

These simplified examples assume the taxable compensation is already net of mandatory employee contributions. Use the calculator for full SSS, PhilHealth, Pag-IBIG, and payroll-frequency handling.

Monthly taxable compensation	Bracket	Estimated withholding tax
PHP 20,000	PHP 20,833 and below	PHP 0
PHP 30,000	15% over PHP 20,833	About PHP 1,375
PHP 50,000	PHP 1,875 + 20% over PHP 33,333	About PHP 5,208
PHP 80,000	PHP 8,541.67 + 25% over PHP 66,667	About PHP 11,875
PHP 200,000	PHP 33,541.67 + 30% over PHP 166,667	About PHP 43,542

6. 13th Month, Bonuses, Overtime, and Allowances

Not every peso paid by an employer is treated the same way. The common trouble spots are bonuses, allowances, overtime, and 13th month pay.

• 13th month and other benefits: generally tax-exempt up to the statutory ceiling, currently PHP 90,000.
• Excess benefits: the portion above the ceiling becomes taxable compensation.
• Overtime and holiday pay: can be taxable for ordinary employees, but minimum wage earner rules may differ.
• Allowances: fixed allowances can be taxable unless they qualify for a specific exemption or accountable reimbursement treatment.
• Commissions: often treated as supplementary compensation and can push withholding higher for that payroll period.

For detailed bonus treatment, read 13th Month Pay Philippines 2026. For holiday premium rules, read Holiday Pay Philippines 2026.

7. Year-End Adjustment and Tax Refund

At year-end, the employer compares the total tax due on annual taxable compensation against the total withholding tax already deducted during the year. This process can produce:

• Tax refund: too much tax was withheld earlier in the year.
• Additional withholding: not enough tax was withheld, often because of bonuses, previous employer income, or irregular pay.
• No major adjustment: withholding matched the final annualized tax closely.

If you changed jobs during the year, give your new employer the correct compensation and withholding information from your previous employer. Otherwise, the annualized computation can be wrong and your final pay or December payroll may surprise you.

8. Common Withholding Tax Mistakes

• Computing tax from gross salary only. Mandatory employee contributions usually reduce taxable compensation.
• Forgetting payroll frequency. Monthly, semi-monthly, weekly, and daily payroll use different table thresholds.
• Treating every allowance as tax-free. Many fixed allowances are taxable unless they meet specific rules.
• Ignoring previous employer income. Job changes can affect year-end adjustment.
• Assuming zero monthly withholding means zero annual tax forever. Bonuses and taxable benefits can push annual income above the tax-free bracket.
• Confusing withholding tax with final tax. Withholding is an advance collection; annual tax is reconciled later.

9. FAQs

Who pays withholding tax in the Philippines?

The employee bears the tax, but the employer withholds it from compensation and remits it to the BIR.

Why is my withholding tax zero?

Your taxable compensation may be within the zero bracket after mandatory contributions. For monthly payroll, the zero threshold is around PHP 20,833 taxable compensation.

Are SSS, PhilHealth, and Pag-IBIG deducted before tax?

The employee share of mandatory contributions is generally treated as non-taxable compensation, so it reduces taxable compensation before withholding tax is computed.

Why did my tax suddenly increase when I got a bonus?

Bonuses and commissions can be supplementary compensation. If your total taxable pay for the period is higher, withholding can rise for that payroll period.

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Related Calculators and Guides

• Withholding Tax Calculator Philippines
• Take-Home Pay Calculator Philippines
• PH Payslip Explained Line by Line
• 13th Month Pay Philippines 2026 Guide
• SSS Contribution Philippines 2026 Guide
• PhilHealth Contribution Philippines 2026 Guide
• Pag-IBIG Contribution Philippines 2026 Guide

Official Sources and Further Reading

• Republic Act No. 10963: TRAIN Law
• BIR: Withholding Tax Calculator
• BIR Form 1601-C: Monthly Remittance Return of Income Taxes Withheld on Compensation
• BIR Form 1601-C Guidelines and Instructions
• BIR Revenue Memorandum Circular No. 105-2017: Revised withholding tax table