Update on Recent Increase in Tax Exemption for Individuals

This document is circulated for the participants of the 7th ECOP MGM and should NOT be used for
commercial presentation purposes partially or in its entirety without EXPRESSED permission from
the Author Atty. Priscilla Valer or HRManagement & Business Solutions Inc.
Update on Recent Increase in
Tax Exemption for Individuals
Atty. Priscilla B. Valer
Partner
Republic Act No. 10653: An act adjusting the 13th
month pay and other benefits ceiling excluded
from the computation of gross income for
purposes of income taxation.
Effectivity:
• 15 days following its publication in at least 2
newspapers of general circulation
• Published on 14 February 2015 in Philippine Star and
Manila Bulletin
• Effective date: 2 March 2015.
Rules and Regulations:
• Secretary of Finance issued Revenue Regulations No. 32015 dated March 9, 2015.
• Revenue Regulations No. 3-2015 was published on
March 16, 2015 in Manila Bulletin.
• The increased 82K tax exempt ceiling shall apply to the
13th month pay other benefits paid or accrued
beginning January 1, 2015.
Salient Amendments:
• Increase tax exempt ceiling of 13th month pay and
other benefits from P30,000 to P82,000.
• President will adjust the ceiling every 3 years based on
CPI.
Comparison:
Old Section 32 (B)(7)(e)
Section 32 (B)(7)(e), as Amended by RA 10653
"(e) 13th Month Pay and Other Benefits. — Gross
benefits received by officials and employees of public
and private entities: Provided, however, That the total
exclusion under this subparagraph shall not exceed
Thirty thousand pesos (P30,000) which shall cover:
“(e) 13th Month Pay and Other Benefits. — Gross
benefits received by officials and employees of public
and private entities: Provided, however, That the total
exclusion under this subparagraph shall not exceed
EIGHTY TWO THOUSAND PESOS (P82,000) which shall
cover:
"xxx
“xxx
"(iv) Other benefits such as productivity incentives
and Christmas bonus: Provided, further, That the
ceiling of Thirty thousand pesos (P30,000) may be
increased through rules and regulations issued by the
Secretary of Finance, upon recommendation of the
Commissioner, after considering, among others, the
effect on the same of the inflation rate at the end of
the taxable year.”
(iv) Other benefits such as productivity incentives and
Christmas bonus: Provided, That EVERY THREE (3)
YEARS AFTER THE EFFECTIVITY OF THIS ACT, THE
PRESIDENT OF THE PHILIPPINES SHALL ADJUS THE
AMOUNT HEREIN STATED TO ITS PRESENT VALUE
USING THE CONSUMER PRICE INDEX (CPI), AS
PUBLISHED BY THE NATIONAL STATISTICS OFFICE
(NSO).”
Benefits subject to 82k ceiling Tax exempt benefits not
covered by the 82k ceiling
Taxable compensation not
covered by 82K ceiling
13th month pay
Basic salary
Other bonuses 14th month
Other allowances
Productivity bonus
Discretionary bonus
Longevity pay
Excess value of de minimis
benefits [Unnumbered Ruling
No. DA-(ECB-006)-147-09]
De minimis benefits
conforming to the ceiling set
under RR 5-11
13th month pay and other
benefits (regardless of
amount) received on account
of involuntary separation (BIR
Ruling No. 135-14)
De minimis benefits under Revenue Regulations (RR) No. 5-11
"The following shall be considered as "de minimis" benefits not subject to income tax as well
as withholding tax on compensation income of both managerial and rank and file employees:
a) Monetized unused vacation leave credits of private employees not exceeding ten (10)
days during the year;
b) Monetized value of vacation and sick leave credits paid to government officials and
employees;
c) Medical cash allowance to dependents of employees, not exceeding P750 per employee
per semester or P125 per month;
d) Rice subsidy of P1,500 or one (1) sack of 50 kg. rice per month amounting to not more
than P1,500;
e) Uniform and Clothing allowance not exceeding P5,000 per annum (as amended by RR 812);
f)
Actual medical assistance, e.g., medical allowance to cover medical and healthcare
needs, annual medical/executive check-up, maternity assistance, and routine
consultations, not exceeding P10,000.00 per annum;
g) Laundry allowance not exceeding P300 per month;
h) Employees achievement awards, e.g., for length of service or safety achievement, which
must be in the form of a tangible personal property other than cash or gift certificate,
with an annual monetary value not exceeding P10,000 received by the employee under
an established written plan which does not discriminate in favor of highly paid
employees;
i)
Gifts given during Christmas and major anniversary celebrations not exceeding P5,000
per employee per annum;
j)
Daily meal allowance for overtime work and night/graveyard shift not exceeding twentyfive percent (25%) of the basic minimum wage on a per region basis;
"All other benefits given by employers which are not included in the above enumeration
shall not be considered as "de minimis" benefits, and hence, shall be subject to income tax
as well as withholding tax on compensation income."
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