Tax Exemption PROS and CONS

Good day! First I would like to apologize for posting the topic here in OTHERS for I do not know where to post my concern.

Regarding my concern, I would like to start with my monthly income (gross) of 20k. Since it is above minimum wage, my income is taxable. This 2016, my employer proposed (with consultation with CPA) that all employees should will be earning minimum wage (for me, it's 7.5k per month) and the remaining (12.5k) salary from my original monthly salary will be distributed to other allowances like transportation, meal, load, etc.

Well, the good thing is that I will be exempted of tax required by the law but I have an uncomfortable feeling that there will be a problem in the future with this system. Anyone can help me and enlighten me about the pros and cons of this system? Thank you very much

Hi,


Yes, the advantage is that you will be exempt from tax.

The disadvantage will be on your retirement benefits (in case you stay with the company until your retirement) and separation pay (in case you resign from your work). The amount you will receive for these will be much lower than it should be if you are receiving 20k for your salary.

Furthermore, if you resign and transfer to another company, the basis for your offer of salary will be affected by the salary you are receiving from your previous employer.

Katrina288 wrote:Hi,


Yes, the advantage is that you will be exempt from tax.

The disadvantage will be on your retirement benefits (in case you stay with the company until your retirement) and separation pay (in case you resign from your work). The amount you will receive for these will be much lower than it should be if you are receiving 20k for your salary.

Furthermore, if you resign and transfer to another company, the basis for your offer of salary will be affected by the salary you are receiving from your previous employer.

Thank you for your response. This will help me defend my case and others if my employer still pursue the new system. I was also notified that my mandatory benefits will also be affected of the new payroll system.