Pay Tax or Pay Yourself First – It’s A Matter Of Choice

Karamihan sa ating mga Pinoy na narito sa France ay sumasahod lang ng SMIC. Pero mayroon din namang kumikita ng doble sa SMIC. Most of the time, they are the ones who pay taxes.

Salary Increase 2017

The last increase in the SMIC was enforced on 1 January 2017 following a meeting between the government and the social partners in December 2016. The SMIC will be revalued by 0.93%.

The new amount of the Gross SMIC in 2017 is now fixed at 9.76 euros per hour, or 1480.27 euros gross per month (based on 35 hours of work per week). According to the Ministry of Labor, the amount of the net SMIC 2017 will be 1,153 euros net monthly.

To Pay or Not To Pay

Based on my experience, nagdagdag ako ng part time job doing cleaning early in the morning – 6-8 am. Come tax time, I was slapped with 500 Euro tax to pay. Prior years to that, I paid no tax and I also received Prime D’emploi with almost 500 Euro. I calculated my net income from doing the part time job as I gained only a few hundreds in a year after deducting the tax paid. I said to myself that it doesn’t make sense waking up early in the morning to work just to give as tax. I gave up the part time job, received back my prime d’emploi. That’s my choice, yours may differ.

I don’t know how much is the tax ceiling this year, but I’m sure that if you are only receiving the SMIC, you will not pay any taxes. Pero marami ring mga Pinoys ang kumikita ng higit diyan sa SMIC. Isang beses na na-invite kami ng diner, naisingit na nabanggit tungkol sa salary and income tax. I found out na may nagbabayad ng kanilang tax ng more than 1,000 euros a year.

So I offered them a solution. Continue reading the next section.

Pay yourself first or pay others first

Let’s be clear here, it’s not that I don’t like to pay tax. I’m a happy buyer paying 20% of all my expenses, I can’t do anything about it and I learned to live with that. But when it’s about paying again taxes with my salary, that’s a different story. There are ways that the government encourage people to do something to reduce their taxable income. One of a good example is for helping a charity. Do you remember my 10-10-10-70 Formula To Wealth article? If you will put all the 10% in charity alone, that amount is 100% deductible to your taxable income should it not exceed the maximum amount allowed for tax deduction.

But doing these, I am paying others first, and not paying myself.

If I want to pay my self first to reduce my taxable income, I would rather use that 10% to pay directly my Plan Epargne Retrait Populaire (PERP). The maximum amount you can pay for your PERP is 10% of your salary or a fixed amount decided by the tax committee for that fiscal year.

With this, I am paying for my future lifestyle. The money I deposit to my PERP will be a money that I can access when I retire from the work force. This will be an additional income on top of any money that I will receive from my retirement benefits. Rather than giving away my money to anybody else, I pay the money to myself, my future life.

There are some other ways that you can use to offset your taxable income. If you own your apartment or house, you can find ways to reduce your taxable income. If you are holding stock investments, you can find ways to write-off your losses for your tax advantage.

Pay your tax? It’s a matter of choice, that is if you ever know your choices.

If you know something else that can be done to reduce taxes, please comment below to share to others.

Here’s to all of us happy tax payers!

JUN PASION – The Weekend Marketer

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