13th month pay, other bonuses retain tax exemption in revised tax reform package

The tax exemption of workers’ 13th month pay and other bonuses has been retained in the revised tax reform package presented by the Department of Finance (DOF) before the Senate ways and means committee on Tuesday.

“Nakatanggap po tayo ulit na magandang balita na hindi na kasama sa panukala ng DOF ang pagtanggal ng tax exemption ng 13th month pay at iba pang bonus ng mga manggagawang Pilipino. Again, this signifies that our government is listening to our calls and the sentiments of the people, and is open to compromise," Senator Sonny Angara, chairman of the committee, said.

To recall, the DOF earlier agreed to retain the VAT exemption of senior citizens and persons with disabilities. 

“We seek to build on this as we work hand-in-hand in coming up with the much-needed tax reform that will extend the most relief to our people, while balancing it with the government’s ambitious vision of jumpstarting our country’s economic growth,” Angara said.

Pursuant to Republic Act 10653, the 13th month pay and other benefits, including productivity incentives and Christmas bonuses, not exceeding P82,000 provided to both government and private sector employees are exempted from tax.

Before RA 10653 was signed into law in February 2015, only bonuses not exceeding P30,000 were exempted from tax.

“Tinaasan natin ang tax exemption cap ng mga bonus para naman mas malaki ang maiuuwi nilang kita para sa kanilang pamilya,” Angara noted.

DOF’s initial proposal sought to remove this tax exemption of bonuses, while exempting from income tax those who are earning P250,000 and below a year.

The P250,000 tax-exempt income was supposed to cover the P82,000 13th month pay exemption, the P50,000 personal exemption, and the P25,000 deduction for each dependent of taxpayer with a maximum of four dependents.

Now, under the revised proposal, those earning up to P332,000 or P250,000 income plus P82,000 13th month pay and other bonuses will be tax exempt.

According to Finance Undersecretary Karl Kendrick Chua around 4.7 million or 83 percent of taxpayers are seen to be exempted from income tax if the tax reform proposal will be enacted. — RSJ, GMA News