EIGHTEENTH CONGRESS OF THE 
)
REPUBLIC OF THE PHILIPPINES 
)
First Regular Session 
)
S E N A T E
S. No. 
592
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c-:- •
»;>v 1 
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©fftu- of lia
*19 Jll 17 P6 ^3
Introduced by Senator Ralph G. Recto..li .
AN ACT
PROVIDING TAX RELIEF TO THE LABOR SECTOR BY EXPANDING THE 
COVERAGE OF EXCLUSIONS FROM GROSS INCOME AND INCREASING THE 
AMOUNTS OF £>£ A///V/A//5 BENEFITS EXEMPT FROM TAX AMENDING FOR 
THE PURPOSE SECTIONS 32(B) AND 33 OF THE NATIONAL INTERNAL 
REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES
Explanatory Note
This bill seeks to amend Sections 32 and 33 of the National Internal Revenue 
Code (NIRC) of 1997, as amended, as follows:
(a) Excluding from gross income the amounts received by natural and 
juridical persons as indemnity for any loss or injury suffered;
(b) Incorporating a proviso on de minimis benefits into the NIRC of 1997; 
and
(c) Removing the tax advantage of managerial employees over rank-and- 
file employees on fringe benefits.
The role of human capital in developing the economy has been widely 
acknowledged. This is one of the reasons that Congress has enacted pro-labor laws 
such as Republic Act No. 9504 which increased the basic personal exemption and 
exempted minimum wage earners from the payment of income tax. While our current 
tax system provides for some relief to our workers by reducing their income tax 
burden, it still needs to be enhanced to address other issues and concerns besetting 
the labor sector.


Workers are sometimes compensated in the form of back wages, allowances 
and benefits by virtue of a labor dispute award. While it is clearly stated in Revenue 
Memorandum Circular No. 39-2012 that such remunerations are taxable, other 
amounts received by the worker as part of recoveries for physical and nonphysical 
injuries or damages obtained due to the dispute should not be treated as part of those 
remunerations. Moreover, other types of damages awarded by courts should also be 
explicitly included in the list of exclusions from gross income since these do not 
constitute part of the worker's rendered service to his employer.
The incorporation of the provision on de minimis benefits lifted from Revenue 
Regulations No. 5-2011 secures its continued implementation by institutionalizing it in 
the Tax Code. The ceiling amounts therein provided, however, are proposed to be 
adjusted every three years based on their current Consumer Price Index (CPI) values.
The proposed removal of the tax advantage of managerial employees over 
rank-and-file employees with respect to fringe benefits is a move that would reduce 
the income divide between these groups of employees. More than ever, the words of 
President Ramon Magsaysay that those who have less in life should have more in law 
ring true.
We owe it to our labor force to craft laws that ensure they get effectively what 
are due them by expanding and strengthening the mechanisms through which they 
can find relief from the taxes that take off significant amounts from their meager 
monthly take home pay.
In view of the foregoing, immediate approval of this bill is earnestly sought.
/ e j c v


EIGHTEENTH CONGRESS OF THE 
)
REPUBLIC OF THE PHILIPPINES 
)
First Regular Session 
)
S E N A T E
S. No. 
592
5
^* I 
> • 
**
jJ ^ r* ; 
L  . )%
till : ' W
r.?
‘19 JUL 17 P6fl3
Introduced by Senator Ralph G. ReKtciiv.uov. _
AN ACT
PROVIDING TAX RELIEF TO THE LABOR SECTOR BY EXPANDING THE 
COVERAGE OF EXCLUSIONS FROM GROSS INCOME AND INCREASING THE 
AMOUNTS OF DE A//yV/yV/5 BENEFITS EXEMPT FROM TAX AMENDING FOR 
THE PURPOSE SECTIONS 32(B) AND 33 OF THE NATIONAL INTERNAL 
REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES
Be it enacted by the Senate and House o f Representatives o f the Philippines in 
Congress assem bled:
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Section 1. Section 32(B) of the National Internal Revenue Code of 1997, as
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amended, is hereby further amended to read as follows:
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"Sec. 32. Gross Income. -
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"(A) XXX
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"(B) Exclusions from Gross Income. -  The following items shall not be
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included in gross income and shall be exempt from tax under this
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Title:
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"(1) XXX
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"(2) XXX
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"(3) XXX
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"(4) XXX
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"(5) DAMAGES AWARDED BY COURTS, BOARDS OR
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OFFICERS 
EXERCISING 
JUDICIAL 
OR 
QUASI-
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JUDICIAL FUNCTIONS. -  AMOUNTS RECEIVED AS
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INDEMNITY BY NATURAL OR JURIDICAL PERSONS
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FOR ANY LOSS OR INJURY SUFFERED, SUCH AS,
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BUT NOT LIMITED TO:
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(A) DAMAGES 
RECEIVED 
BY 
EMPLOYEES AS 
COMPENSATION 
FOR 
PHYSICAL 
AND 
NONPHYSICAL INJURIES ACQUIRED DURING 
LABOR DISPUTES;
(B) DAMAGES TO PERSONAL OR FAMILY RIGHTS;
(C) DAMAGES FOR SLANDER AND LIBEL;
(D) AWARD FOR LOSS OF LIFE; AND
(E) DAMAGES FOR INJURIES TO THE GOODWILL 
OF A TAXPAYER'S BUSINESS, UNLESS THE 
AMOUNT AWARDED EXCEEDS THE VALUE OF 
GOODWILL.
XXX
" i m
 (7 ) XXX
(8) Miscellaneous Items. -  
"(a) XXX
" (b ) XXX 
"(C ) XXX 
" (d ) XXX 
"(e) XXX 
" ( f)  XXX
"(g) XXX
" (h ) XXX
"(I) DE MINIMIS BENEFITS. -  THESE SHALL BE 
LIMITED TO FACILITIES OR PRIVILEGES 
FURNISHED OR OFFERED BY AN EMPLOYER 
TO HIS EMPLOYEES, BOTH MANAGERIAL 
AND 
RANK-AND-FILE, 
THAT 
ARE 
OF 
RELATIVELY 
SMALL 
VALUE 
AND 
ARE 
OFFERED OR FURNISHED BY THE EMPLOYER 
MERELY AS A MEANS OF PROMOTING THE 
HEALTH, GOODWILL, CONTENTMENT, OR 
EFFICIENCY OF HIS EMPLOYEES, SUCH AS, 
BUT NOT LIMITED TO, THE FOLLOWING:


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"(I) MONETIZED VALUE OF VACATION AND 
SICK 
LEAVE 
CREDITS 
PAID 
TO 
PRIVATE 
EMPLOYEES 
NOT 
EXCEEDING TEN (10) DAYS DURING 
THE YEAR;
" ( II)  MONETIZED VALUE OF VACATION 
AND SICK LEAVE CREDITS PAID TO 
GOVERNMENT 
OFFICIALS 
AND 
EMPLOYEES;
" ( III)  MEDICAL CASH ALLOWANCE TO 
DEPENDENTS OF EMPLOYEES NOT 
EXCEEDING 
ONE THOUSAND 
FIVE 
HUNDRED 
PESOS 
(P I,500) 
PER 
SEMESTER OR TWO HUNDRED FIFTY 
PESOS (P250) PER MONTH;
"(IV ) 
RICE 
SUBSIDY 
OF 
TWO 
THOUSAND PESOS (P2,000) OR ONE 
(1) SACK OF 50-KG. RICE PER MONTH 
AMOUNTING TO NOT MORE THAN 
P2,000;
"(V) UNIFORM 
AND 
CLOTHING 
ALLOWANCE 
NOT 
EXCEEDING 
SIX 
THOUSAND 
PESOS 
(P6,000) 
PER 
ANNUM;
"(V I) 
ACTUAL MEDICAL ASSISTANCE 
TO COVER MEDICAL AND HEALTH 
CARE 
NEEDS, 
ANNUAL 
MEDICAL/ 
EXECUTIVE CHECK UP, MATERNITY 
ASSISTANCE, 
AND 
ROUTINE 
CONSULTATIONS, 
NOT 
EXCEEDING 
TWENTY-FIVE 
THOUSAND 
PESOS 
(P25,000) PER ANNUM;


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"(V II) 
LAUNDRY 
ALLOWANCE 
NOT 
EXCEEDING 
SIX 
HUNDRED 
PESOS 
(P600) PER MONTH;
"(V III) 
EMPLOYEE 
ACHIEVEMENT
AWARDS 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 
TWENTY 
THOUSAND 
PESOS (P20,000) RECEIVED BY THE 
EMPLOYEE UNDER AN ESTABLISHED 
WRITTEN PLAN WHICH DOES NOT 
DISCRIMINATE IN FAVOR OF HIGHLY 
PAID EMPLOYEES;
"(IX ) GIFTS OR PRIZES GIVEN DURING 
CHRISTMAS 
AND 
MAJOR
ANNIVERSARY CELEBRATIONS NOT 
EXCEEDING TEN THOUSAND PESOS 
(P10,000) 
PER 
EMPLOYEE 
PER 
ANNUM;
"(X) DAILY 
MEAL 
ALLOWANCE 
FOR 
OVERTIME WORK NOT EXCEEDING 
TWENTY-FIVE PERCENT (25% ) OF 
THE BASIC MINIMUM WAGE."
PROVIDED, THAT NOT LATER THAN THREE (3) 
YEARS AFTER THE EFFECTIVITY OF THIS ACT AND 
EVERY THREE 
(3) YEARS THEREAFTER, THE 
AMOUNTS STATED UNDER SUBSECTIONS (III), 
(IV), (V), (VI), (V II), (V III), AND (IX ) HEREIN 
SHALL BE ADJUSTED TO THEIR PRESENT VALUE
USING THE CONSUMER PRICE INDEX (CPI) AS
4


1 
PUBLISHED BY THE 
PHILIPPINE STATISTICS
2 
AUTHORITY (PSA) WITHIN THIRTY (30) DAYS
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FROM THE EFFECTIVITY THEREOF.
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” (J) 
FRINGE BENEFITS TO RANK-AND-FILE
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EMPLOYEES -  BENEFITS GIVEN TO THE RANK-
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AND-FILE 
EMPLOYEES, 
WHETHER 
GRANTED
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UNDER A COLLECTIVE BARGAINING AGREEMENT
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OR NOT."
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Sec. 2. Section 33 of the National Internal Revenue Code of 1997, as amended,
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is hereby further amended to read as follows:
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"SEC. 33. Special Treatment of Fringe Benefits. -
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"(A) XXX
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"(B) Fringe Benefit Defined. -  For purposes of this Section, the term
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'fringe benefit' means any good, service or other benefit furnished
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or granted in cash or in kind by the employer to an individual
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such as, but not limited to, the following:
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"(1) Housing;
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"(2) Expense account;
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"(3) Vehicle of any kind;
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"(4) Household personnel, such as maid, driver and others;
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"(5) Interest on loan at less than market rate to the extent of
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the difference between the market rate and actual rate
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granted;
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"(6) Membership fees, dues and other expenses borne by the
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employer for the employee in social and athletic clubs or
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other similar organizations;
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"(7) Expenses for foreign travel;
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"(8) Holiday and vacation expenses;
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"(9) Educational assistance to the employee or his dependents;
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and


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"(10) Life or health insurance and other non-life insurance
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premiums or similar amounts in excess of what the law
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allows.
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"(C) Fringe Benefits Not Taxable. -  The following fringe benefits are not
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taxable under this Section:
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"(1) Fringe benefits which are authorized and exempted from
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tax under special laws;
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"(2) Contributions of the employer for the benefit of the
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employee to retirement, insurance and hospitalization
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benefit plans;
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"(3) Benefits given to the rank-and-file employees, whether
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granted under a collective bargaining agreement or not;
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and
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"(4) De minimis benefits as defined in [ the-roles and regulations
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to- b e -promulgated by- thc-Secretary of Finance, upon
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recommendation of the Commissioner] SECTION 32
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(B )(8)(I) HEREOF.
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"The Secretary of Finance is hereby authorized to promulgate, upon
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recommendation of the Commissioner, such rules and regulations as are
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necessary to carry out efficiently and fairly the provisions of this Section,
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taking into account the peculiar nature and special need of the trade,
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business or profession of the employer."
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Sec. 3. Impiementing Ruies and Reguiations (IRR). -  Within sixty (60) days
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upon approval of this Act, the Secretary of Finance shall issue the IRR for the effective
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implementation of this Act.
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Sec. 4. Separability Clause. -  If any provision of this Act is declared
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unconstitutional or invalid, other parts or provisions hereof not affected thereby shall
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continue to be in full force and effect.
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Sec. 5. Repealing Clause. -  All laws, orders, issuances, circulars, rules and
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regulations or parts thereof, which are inconsistent with the provisions of this Act are
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hereby repealed or modified accordingly.


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Sec. 6. Effectivity. - This Act shall take effect fifteen (15) days after its
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publication in the Official Gazette or in at least two (2) newspapers of general
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circulation.
Approved,