Employee Tax Refund

Aside from the 13th month pay, Christmas bonus and hamon, some employees are waiting for their tax refunds before the year ends or early in January of the succeeding year.

WHAT IS A TAX REFUND? A tax refund is the excess tax withheld by your employer over the actual tax due for your annual taxable compensation – salaries, allowances, bonuses and other taxable benefits. Simply put, it is when your annual tax due is less than the total tax withheld during the year.

HOW COME OTHERS RECEIVE A REFUND WHILE OTHERS DON'T? As you may have personally experienced or noticed, not everyone receives a tax refund. If you’re employed to the same employer from January 1 to December 31, it is highly probable that the total tax withheld from your monthly pay is equivalent to your annual tax due.

But there are also instances when they are not equal, like when you are employed mid-year. Since the withholding tax table assumes that you are receiving the same monthly compensation during the entire year, the amount of tax withheld is higher, hence, the surplus of tax withheld over your annual tax due.

WHEN SHOULD I RECEIVE IT? The excess tax withheld by your employer shall be refunded on or before January 25 of the following year (RR No. 2-98 as amended). However, some employers provide this on the last payroll period of the year since most companies have already pre-annualized the withholding tax on compensation of their employees as early as October.

If based on your computation, you are entitled to it and you haven’t received it by January 25 next year, inquire from your payroll team.

We hope this clarifies any confusion you have about your tax refunds, if you have any.

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