DOF eyes higher tax-exempt ceilings for private, public workers’ benefits

The Department of Finance (DOF), along with its attached agency the Bureau of Internal Revenue (BIR), is looking into raising the tax-exempt ceilings for the benefits being received by both private and public sector workers.

In a statement on Saturday, the DOF said the plan is in line with President Ferdinand “Bongbong” Marcos Jr.’s commitment to inclusive growth, better labor conditions, and overall social protection of Filipino families.

The Finance Department’s plan was also disclosed by Marcos in his pre-departure remarks at Villamor Air Base, Pasay City.

The President departed for Kuala Lumpur, Malaysia to attend the 47th ASEAN Summit and Related Summits.

“[The] DOF and the BIR have submitted to us proposals for the increase of the ceilings for the tax-exempt de minimis benefits. As an example, the uniform and clothing allowance of more than P7,000 per year is subject to tax. Since costs of clothing have risen, we are looking at increasing the de minimis ceiling to P8,000 a year,” Marcos said.

“These changes are not just about numbers—they are about fairness and dignity in the workplace. Every Filipino worker deserves to benefit from the nation’s growth,” the President said.

in the DOF’s proposal, employees in both private and government sectors should enjoy higher non-taxable allowances and benefits to account for inflation and rising living costs as well as enhance competitiveness across sectors, while maintaining prudent fiscal management.

In particular, the Finance Department is proposing that the tax-exempt ceiling for monetized unused vacation leave credits for private employees will be increased from 10 days to 12 days, while the current uncapped benefit for government employees’ monetized vacation and sick leaves will be retained.

Moreover, the DOF is proposing to adjust the tax-exempt limit for medical cash allowances for dependents from P1,500 to P2,000 per semester, while rice subsidies will go up from P2,000 to P2,500 per month or its market equivalent. 

The agency is also looking into increasing the non-taxable threshold for uniform and clothing allowance from P7,000 to P8,000 per year.

The DOF’s other proposed adjustments include increasing the non-taxable ceiling for actual medical assistance from P10,000 to P12,000 per year, laundry allowance from P300 to P400 per month, employee achievement awards from P10,000 to P12,000 per year, and Christmas or anniversary gifts from P5,000 to P6,000 per year. 

Further, the Finance Department is proposing to hike the tax-free limit for meal allowance for overtime or night-shift work from 25% to 30% of the minimum wage, while the combined ceiling for collective bargaining agreement (CBA) and productivity incentives will be adjusted from P10,000 to P12,000 per year.

“These increases will have minimal impact on the government revenues but will definitely make a significant difference for our workers,” said Finance Secretary Ralph Recto.

The DOF said Recto also instructed the BIR to explore possible exemptions for certain taxpayer segments from the obligation to withhold and remit creditable withholding taxes. 

The DOF and the BIR are also studying ways to simplify and lower the applicable withholding tax rates to reduce compliance costs for taxpayers, according to the Finance Department.

Marcos, meanwhile, reaffirmed the government’s firm commitment to integrity in public finance and taxation, emphasizing that the BIR will recalibrate its priorities to ensure that those found complicit in irregularities surrounding flood control projects are held accountable under the law.

“We will uphold fairness in our tax system. We assure our micro, small, and medium enterprises and large corporations who have been lawfully paying their taxes, that you will be treated justly,” the President said. —KG, GMA Integrated News