Income Tax on the Salary of an Employee Aged 66 in the Philippines
A comprehensive legal overview (2025)
1. Overview
An employee who is 66 years old is simultaneously (a) a senior citizen under Republic Act (RA) 7432, as amended, and (b) an employee earning compensation income subject to Title II of the National Internal Revenue Code (NIRC) of 1997, as last amended by the TRAIN Law (RA 10963, effective 1 January 2018) and subsequent refinements through the CREATE Law (RA 11534, 2021). While Philippine tax law grants a range of privileges to senior citizens, there is no special income-tax rate or blanket exemption for their continuing salaries. Instead, the regular graduated income-tax rates and withholding-tax rules for compensation still apply, subject to the same exclusions and exemptions enjoyed by all individual taxpayers (e.g., the ₱250,000 annual threshold, the ₱90,000 ceiling for 13th-month pay and other benefits, etc.).
2. Governing Statutes & Regulations
| Instrument | Key Provisions Affecting a 66-Year-Old Employee |
|---|---|
| NIRC, as amended (Secs. 24 & 32-36) | Defines compensation income; prescribes graduated tax schedule; lists exclusions such as retirement benefits, SSS/GSIS pensions, GSIS/SSS/HDMF contributions, de minimis benefits, and the ₱90,000 13th-month/other benefits cap. |
| RA 10963 (TRAIN) | Replaced personal & additional exemptions with a flat ₱250,000 annual tax-free threshold; introduced new withholding tables (BIR RR 11-2018, as amended). |
| RA 11534 (CREATE) | Did not alter individual-income provisions but refined fringe-benefit-tax (FBT) rules—still 35 % if paid to managerial employees regardless of age. |
| RA 7432, RA 9257, RA 9994 (Senior Citizens Acts) | Grant VAT & percentage-tax exemptions on goods/services purchased by a senior citizen; 5 % discount on utilities; additional medical exemptions. They do not exempt salary income; their income-tax relevance lies mainly in the employer’s ability to claim a 15 % tax credit (against gross income tax) for the amount of salary actually paid to senior-citizen employees. |
| RA 7641 (Retirement-Pay Law) & Sec. 32(B)(6)(a), NIRC | Retirement benefits due to compulsory retirement at 60-65 or optional retirement at ≥50 with ≥10 years’ service are tax-exempt once, provided they comply with a reasonable retirement plan registered with the BIR. |
| BIR Regulations & Circulars | RR 11-2018 (withholding tables); RR 13-2022 (substituted filing rules); RMC 50-2018 & RMC 74-2019 (clarifications on TRAIN exemptions); RMC 138-2021 (CREATE fringe-benefit guidance). |
3. The Current Graduated Tax Rates (Calendar Years 2023-2027)
| Taxable Compensation Income (Annual) | Income Tax Due |
|---|---|
| ₱0 – ₱250,000 | 0 % |
| ₱250,001 – ₱400,000 | 15 % of excess over ₱250,000 |
| ₱400,001 – ₱800,000 | ₱22,500 + 20 % of excess over ₱400,000 |
| ₱800,001 – ₱2,000,000 | ₱102,500 + 25 % of excess over ₱800,000 |
| ₱2,000,001 – ₱8,000,000 | ₱402,500 + 30 % of excess over ₱2,000,000 |
| Over ₱8,000,000 | ₱2,202,500 + 35 % of excess over ₱8,000,000 |
(Under TRAIN, a further cut of the first two brackets—from 15 % & 20 % to 10 % & 15 %, respectively—is scheduled for 1 January 2028 unless Congress intervenes.)
4. Senior-Citizen Status vs. Compensation Taxation
No Preferential Rate on Salary. The Senior Citizens Acts focus on consumption-side tax relief (VAT discounts, etc.). They do not override Sec. 24(A) NIRC, which supplies the compulsory graduated-rate regime for salary income, irrespective of the taxpayer’s age or physical condition.
Possible Employer Tax Credit. Employers may claim a 15 % tax credit (not a deduction) of the actual salary and wages paid to each senior-citizen employee, provided:
- The employee is duly registered as a senior citizen with an OSCA ID;
- The employer maintains at least 60 % regular workforce aged <60; data-preserve-html-node="true" and
- The total tax credit claimed does not exceed the employer’s total tax due for the year. This credit benefits the company, not the employee.
Exempt Retirement Benefits vs. Ongoing Salary.
- Retirement benefits paid upon actual retirement at or after 60 – 65 remain tax-free once (Sec. 32(B)(6)(a)).
- If the same individual is re-employed or his service is extended beyond compulsory retirement, subsequent salaries lose the exemption and revert to regular taxation.
- Any second retirement benefit from the same employer (or a related employer) is taxable.
5. Standard Exclusions & Special Fringe-Benefit Rules
| Item | Treatment |
|---|---|
| SSS, PhilHealth, Pag-IBIG contributions (both employee share & employer’s mandatory counterpart) | Excluded from gross income. Employer share is non-taxable to employee; employee share is deductible in computing taxable income (effected via payroll). |
| GSIS/SSS/HDMF pensions or lump-sum retirement | Exempt; but ongoing salary while still working is not. |
| 13th-Month Pay & Other Benefits | Up to ₱90,000 per year is excluded. Excess is aggregated with taxable compensation. |
| De Minimis Benefits | Up to BIR-prescribed ceilings (e.g., uniform allowance ₱6,000/yr, rice subsidy ₱2,000/mo, medical cash allowance ₱1,500/semester, etc.) are excluded. |
| Fringe Benefits to Rank-and-File Employees | Treated as additional compensation subject to normal withholding, benefiting from the ₱90,000 cap. |
| Fringe Benefits to Managerial Employees | Subject to 35 % Fringe Benefit Tax (FBT) on a grossed-up monetary value; age does not alter the rate. |
6. Withholding-Tax Obligations of the Employer
Computation Frequency
- Semimonthly (default) or monthly using BIR’s latest withholding tables (re-issued 2023, still TRAIN-compliant).
- An annualized “year-end adjustment” ensures that the total advance tax equals the actual tax due.
Filing & Remittance
- BIR Form 1601-C (Monthly) via eFPS/eBIRForms; due on or before the 10th day of the following month (or 15th/20th/25th if under staggered eFPS groupings).
- BIR Form 2316 must be issued to the employee every 31 January (or upon termination) to certify taxes withheld; an employee who has one employer for the year and whose tax has been correctly withheld qualifies for substituted filing (no separate ITR). A 66-year-old employee is no exception.
Minimum Wage Earner Rule
- Senior citizens earning only the prescribed statutory minimum wage (plus de minimis benefits) are fully exempt, regardless of age—by operation of law, not senior-citizen status.
7. Social-Security Contributions at 66
| Program | Liability of the Employee at 66 | Remarks |
|---|---|---|
| SSS (Private Sector) | If re-employed after starting an SSS pension, contributions cease (member now a pensioner). If still pre-pension (retirement deferred), contributions continue until actual claiming but no later than 70. | |
| GSIS (Government) | Membership normally terminates upon compulsory retirement (65). Extension beyond 65 is exceptional and usually on contractual basis without further GSIS coverage. | |
| PhilHealth | Lifetime members (≥60 with 120 contributions) need not pay; otherwise, contributions continue. | |
| Pag-IBIG | No automatic cessation; contributions continue while employed, but employee may opt for voluntary status if separated. |
Social contributions are not income taxes but interact with payroll withholding and net-take-home pay.
8. Illustrative Computation (CY 2025)
Facts: Mr. Santos, aged 66, is a rank-and-file employee in Metro Manila earning ₱70,000 gross monthly salary, plus ₱70,000 13th-month pay, standard de minimis benefits (within BIR caps), and mandatory government contributions. No other income. Analysis Annual taxable compensation = • Salary: ₱70,000 × 12 = ₱840,000 • 13th-Month Pay: ₱70,000 – ₱90,000 cap? Cap not yet breached, so fully exempt. • De minimis benefits: exempt. Total taxable income = ₱840,000 – ₱250,000 threshold = ₱590,000
Tax due using graduated table • First ₱400,000: ₱22,500 • Excess ₱190,000 × 20 % = ₱38,000 Total income tax = ₱60,500 Employer withholds this amount over the year. Being a single-employer case, Form 2316 substitutes for ITR filing.
9. Special Situations
| Scenario | Tax Consequence |
|---|---|
| Early Retirement Accepted at 66, Paid Lump-Sum Under a BIR-Registered Plan | Lump-sum is tax-exempt (once). Subsequent consultancy fees or re-employment salaries are taxable. |
| Separation Pay due to total disability at 66 | Exempt under Sec. 32(B)(6)(b). |
| Non-resident Senior Citizen (66) Rendering Philippine Services | Compensation is subject to 15 % final tax under Sec. 25(C) if the individual’s stay ≤183 days and he enjoys similar treatment in his home country; otherwise graduated rates apply. |
| Stock-Option Gains Received In-Kind | Treated as fringe benefit (managerial) or additional compensation (rank-and-file); age does not change character. |
| Qualified Pension Withdrawals | GSIS/SSS pensions are tax-exempt; privately-run pension withdrawals may be taxable unless covered by a BIR-approved plan meeting Sec. 32(B)(6)(a) or (e). |
10. Administrative & Documentary Requirements
Proof of Age / Senior-Citizen ID. Needed mainly for employer’s 15 % tax-credit claim and to access consumer-side VAT discounts; it does not alter withholding computations.
Registration Updates (BIR Form 1905). A change in civil status, employer, or withholding-tax status must be reported; age alone (crossing 65) does not trigger re-registration.
Record-Keeping by Employers. Payroll registers, SSS & PhilHealth remittance files, OSCA IDs, and proof of senior-citizen wages must be retained for at least 10 years (Sec. 235, NIRC).
11. Common Pitfalls
| Mistake | Consequence |
|---|---|
| Treating the entire salary of a senior citizen as VAT-like income-tax-exempt | Results in deficiency-tax assessments, surcharges, and interest. |
| Claiming the 15 % senior-citizen salary tax credit without OSCA documentation | Disallowance of credit; penalties for understatement. |
| Granting second tax-exempt retirement pay from the same employer | Entire second benefit becomes taxable; employer withholding lapses. |
| Ignoring the ₱90,000 benefits cap after TRAIN | Excess becomes un-withheld taxable income, attracting penalties. |
12. Conclusion
A 66-year-old employee resident in the Philippines continues to be taxed on salary under the ordinary graduated rates, exactly like younger colleagues. Age-based privileges lie elsewhere—in consumer-side VAT relief, certain employer tax credits, and one-time exemption of bona-fide retirement benefits—not in the routine taxation of ongoing compensation. Compliance therefore turns on:
- correct application of the TRAIN-era withholding tables;
- observance of the ₱250,000 tax-free threshold and ₱90,000 benefits ceiling;
- proper segregation of exempt retirement pay versus taxable post-retirement salaries; and
- diligent documentation so the employer may claim the senior-citizen wage tax credit without jeopardy.
Employees and employers who keep these distinctions clear will avoid the most common audit findings and ensure that senior citizens enjoy all the reliefs the law actually grants—and only those the law grants—no more, no less.