How is income tax calculated in Philippines?
An employee’s income tax in the Philippines is worked on the year’s compensation. First the employee’s own SSS, PhilHealth and Pag-IBIG contributions come off, because the Tax Code excludes them from taxable compensation. What remains is taxed through the graduated table that took effect on 1 January 2023: nothing on the first ₱250,000, then 15%, 20%, 25%, 30% and 35% on each slice above.
Your employer withholds the tax from each payday, so for most employees with one employer the amount withheld over the year is the whole tax, and no annual return is needed.
What is the income tax rate in Philippines?
| Taxable income | Rate |
|---|---|
| ₱0 – ₱250,000 | 0% |
| ₱250,000 – ₱400,000 | 15% |
| ₱400,000 – ₱800,000 | 20% |
| ₱800,000 – ₱2,000,000 | 25% |
| ₱2,000,000 – ₱8,000,000 | 30% |
| Over ₱8,000,000 | 35% |
What mandatory salary deductions apply?
- SSS: 15% of your monthly salary credit, of which the employee pays 5%. The credit runs from ₱5,000 to ₱35,000, so the most an employee pays is ₱1,750 a month.
- PhilHealth: 5% of basic monthly salary, shared equally, on salaries from ₱10,000 to ₱100,000. The employee’s half is at least ₱250 and at most ₱2,500 a month.
- Pag-IBIG: 2% of monthly pay up to ₱10,000 (1% if you earn ₱1,500 or less), so at most ₱200 a month. Foreign nationals working in the Philippines no longer contribute.
Gross salary and take-home salary
Gross salary is what your contract says before anything is taken off. Take-home salary is what reaches your bank account after income tax and the compulsory employee contributions. Employer contributions are paid on top of your salary and are not taken from it.
Example: ₱50,000.00 a month
A Filipino employee earning ₱50,000 a month in Makati.
| Item | Monthly | Annual |
|---|---|---|
| Gross salary | ₱50,000.00 | ₱600,000.00 |
| Income tax | ₱4,568.33 | ₱54,820.00 |
| Compulsory contributions | ₱3,200.00 | ₱38,400.00 |
| Take-home pay | ₱42,231.67 | ₱506,780.00 |
Effective income tax rate 9.1%; all deductions 15.5%.
How can employees legally reduce their taxes?
- Keep the 13th-month pay and other benefits within the ₱90,000 a year that is tax-free.
- De minimis benefits from your employer, within their limits, are not taxable compensation.
- Minimum wage earners pay no income tax on their minimum wage, holiday, overtime, night-shift and hazard pay.
Frequently asked questions
How much is tax-free in the Philippines?
The first ₱250,000 of taxable compensation a year is taxed at 0%. On top of that, the 13th-month pay and other benefits up to ₱90,000 are tax-free, and the employee’s SSS, PhilHealth and Pag-IBIG contributions are not taxed.
Is the 13th-month pay included here?
No. The calculator works on your regular salary × 12. The 13th-month pay up to the ₱90,000 ceiling is tax-free, so it adds to take-home pay without adding tax.
Why is my SSS the same as someone who earns more?
SSS is charged on a salary credit, not your exact pay, and the credit stops at ₱35,000. Everyone earning ₱34,750 or more a month pays the same ₱1,750.
Do foreigners pay SSS and PhilHealth?
Foreign nationals employed in the Philippines contribute to SSS and PhilHealth like Filipinos, but they no longer contribute to Pag-IBIG.
Official sources
- Bureau of Internal Revenue: NIRC Sec. 24(A) as amended by RA 10963 (TRAIN): rates from 1 January 2023. Read 5 November 2026.
- Social Security System: Circular 2024-006: Schedule of SSS contributions effective January 2025. Read 5 November 2026.
- PhilHealth: Premium contribution schedule for direct contributors (Circular 2019-0009). Read 5 November 2026.
- Pag-IBIG Fund: Circular 460: increase in the Maximum Fund Salary to ₱10,000, February 2024. Read 5 November 2026.
- Social Security System: Circular 2024-008: Schedule of SSS contributions for self-employed members effective January 2025. Read 5 November 2026.
Last reviewed 5 November 2026. An estimate for planning, not tax advice; your employer’s payroll and the tax authority decide what is actually withheld.
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