Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

EIGHTEENTH CONGRESS
Second Regular Session

House Bill No, 7107

Introduced by Representative JUAN FIDEL FELIPE F. NOGRALES

AN ACT
PROVIDING FOR TAX INCENTIVES FOR EMPLOYEES ON A WORK-FROM-
HOME OR TELECOMMUTING PROGRAM, FURTHER AMENDING FOR THE
PURPOSE, REPUBLIC ACT NO. 8424 OTHERWISE KNOWN AS THE
NATIONAL INTERNAL REVENUE CODE (NIRC) OF 1997, AND FOR OTHER
PURPOSES

EXPLANATORY NOTE

Telecommuting has become the new normal. Be it because of the continued
health and safety risks posed by physically reporting to work during this pandemic or
Decause of the realization of the benefits and advantages of working from home,
telecommuting has permeated into society and is most likely here to stay.

While telecommuting has provided Filipino employees with much needed
Jexibility and convenience in performing their daily tasks, it has also provided
challenges like increased electricity bills, unreliable internet connectivity, increased
stress, disturbed mental health, and more as Filipinos still try to hastily adapt to this
new normal.

Republic Act No. 11165 or the Telecommuting Act has made it a declared state
Dolicy to protect the rights of workers and promote their welfare, especially in the light
of technological development that has opened up new and alternative avenues for
employees to carry cut their work such as telecommuting and other flexible
arrangements. In this light, it is but proper to legislate measures that would assist the


Filipinos transitioning to new modes of work and alleviate their concerns. One of these
concerns is the sudden surge of electricity expenses at home.

Therefore, this measure seeks to provide telecommuting employees, with
allowable tax deductions for electricity expenses to cushion the blow on the probable
surge in their bills as they adapt to telecommuting, if their employers do not provide
them with allowance. Should the employers provide allowances, this bill also aims to
classify those allowances as tax exempt ensuring that employees who receive such
allowances enjoy the benefit to its full extent.

In view of the foregoing, the passage of this bill is earnestly sought.

whe FIDEL Capel,


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

EIGHTEENTH CONGRESS
Second Regular Session

House Bill No.__7107

Introduced by Representative JUAN FIDEL FELIPE F. NOGRALES

AN ACT
PROVIDING FOR TAX INCENTIVES FOR EMPLOYEES ON A WORK-FROM-
HOME OR TELECOMMUTING PROGRAM, FURTHER AMENDING FOR THE
PURPOSE, REPUBLIC ACT NO. 8424 OTHERWISE KNOWN AS THE NATIONAL
INTERNAL REVENUE CODE (NIRC) OF 1997, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:

Section 1. Section 34 of Republic Act No. 8414 is hereby amended to read as
follows:

"Sec. 34. Deductions from Gross Income. - Except for taxpayers earning
compensation income arising from personal services rendered under an employer-
employee relationship where no deductions shall be allowed under this Section,
EXCEPT AS OTHERWISE PROVIDED FOR HEREIN IN CASE OF WORK-
FROM-HOME AND TELECOMMUTING EMPLOYEES, in computing taxable
income subject to income tax under Sections 24(A); 25(A); 26; 27(A), (B), and
(C); and 28(A)(1), there shall be allowed the following deductions from gross
income:

(A) Expenses -

(1) Ordinary and Necessary Trade, Business or Professional Expenses-
(a) XXX


(b) XXX
(c) XXX
(D) WORK-FROM-HOME OR TELECOMMUTING

XXX

EMPLOYEES. — NOTWITHSTANDING THE FIRST PARAGRAPH
OF THIS SECTION, INDIVIDUALS EARNING COMPENSATION
INCOME SHALL BE ENTITLED TO A DEDUCTION OF TWENTY-
FICE PESOS (P25.00) FROM THEIR TAXABLE INCOME FOR
EVERY HOUR WORKED UNDER A WORK-FROM-HOME OR
TELECOMMUTING ARRANGEMENT. PROVIDED, THAT, THE
EMPLOYEE SHALL CERTIFY UNDER OATH, THE NUMBER OF
HOURS SERVED UNDER THE WORK-FROM-HOME OR
TELECOMMUTING PROGRAM FOR THE YEAR, WHICH SHALL
BE FILED AS AN ATTACHMENT TO THE EMPLOYEE'S INCOME
TAX RETURN.

ALLOWANCES OR OTHER BENEFITS GRANTED BY
EMPLOYERS TO THEIR EMPLOYEES TO COVER EXPENSES
NECESSARY FOR TELECOMMUTING, NOT EXCEEDING TWO
THOUSAND PESOS (P2,000) PER MONTH, SHALL BE
CONSIDERED AS A NON-TAXABLE BENEFIT. AMOUNTS
GRANTED IN EXCESS SHALL BE SUBJECTED TO EXISTING
TAX RULES. PROVIDED, THAT, EMPLOYEES RECEIVING THIS
BENEFIT SHALL NO LONGER BE ENTITLED TO THE HOURLY
DEDUCTION FROM INCOME TAX PROVIDED FOR IN THE
PRECEDING PARAGRAPH. PROVIDED FURTHER, THAT,
EMPLOYERS SHALL BE ENTITLED TO AN ADDITIONAL FIFTY
PERCENT (50%) INCOME TAX DEDUCTION FOR
ALLOWANCES GRANTED WITHIN THE SPECIFIED CEILING.


Sec. 2. Implementing Rules and Regulations. — The Department of Finance,
together with the Bureau of Internal Revenue shall promulgate the rules and regulations
to implement this Act within ninety (90) days from the effectivity of this Act.

Sec. 3. Separability Qause. —If any provision or part thereof is held invalid or
unconstitutional, the remainder of the law or the provision not otherwise affected shall
remain valid and subsisting.

Sec. 4. Repealing Clause. — Any law, presidential decree or issuance, executive
order, letter of instruction, administrative order, rule, or regulation contrary to or
inconsistent with the provisions of this Act is hereby repealed, modified, or amended
accordingly.

Sec. 5. Effectivity Clause. — This Act shall take effect fifteen (15) days after its
publication in at least two (2) newspapers of general circulation.

Approved


‘AX INCENTIVE FOR WORK FROM HOME & TELECOMMUTING INDIVIDUALS
(MENDING THE NIRC

alient Features

1. Introduced by Rep. Juan Fidel Felipe F. Nograles
2. Amending the NIRC (Tax Code)
3. Incentives (2 Groups) Incentives will depend on whether or not the employer is
giving out telecommuting allowances already or not.
a. Employees who are not receiving telecommuting allowance from their
employers.

They receive P25.00 per hour of telecommuting deduction for income
tax purposes.

If an employee works for 8 hours a day, 5 days a week, for 4 weeks,
he will be entitled to a deduction of P4,000. Although this appears
hig, the net benefit or actual cash savings to the employee under the
tax system will really only be around P1,000 per month

Existing

“Annual Income | P500,000 2»
Tax Rate P22,500 + 20% in excess of P400K
Tax Payable _

. P1,000 per month deduction

“annual Income —~=C*« SOOO
WFH Deduction (12 Months) 48,000

Net Taxable Income 452,000 Bae bots
Tax Rate eae P22,500 + 20% in excess of P400K
TaxPayable P32,9000

. Comparison

| Tax

fithout Deduction ==. P42,500

Tax with Deduction Wie. B| 32,900 ate
Tax Reduction _ __P9,600 is
Monthly Tax reduction Pp.800

b. Employees who are receiving telecommuting allowance from employers


i. Allowances received for telecommuting shall be considered as non-
taxable benefits of the employee up to P2,000 per month. Any
allowance given in excess shall be considered as taxable like other
allowances.

1. Existing
“Annual Income — ____ P500,000 Fi al
_Tax Rate ___P 22,500 + 20% in excess of P400K
Tax Payable iss
2. P1,000 per month deduction
AnnualIncome | P500,000,——
Non-taxable P24,000

Telecommuting benefit

(P2,000 x 12 Months) _ ies _ ask

Net Taxable Income P500,000 (The Benefit doesn’t
change the taxable income as it is

_pon-taxable) ___ = z
P22,500 + 20% in excess of P400K

3. Comparison
Tax without Deduction SS P42,500,
“Tax with the benefit P42,500
Tax Reduction PO
Benefit

li. Illustration of the Impact of the additional 50% tax deduction for
employers

1. Existing

Corporate Annual Income | P1,000,000
Tax Rate 30%



2. Giving P100,000 allowances without the 150% deduction

scheme
[Annual Income 'P1,000,000 _ dae
Allowances _ P100,000
"Net Taxable Income, 900,000 Ee
“Tax Rate 180%
TaxPayable —_P270,0000
iii, Giving P100,000 allowances with the additional 50% deduction
scheme
Annual Income al ~~ Pi,000,000
Allowances (150%) _—_-P150,000
Net Taxable Income P850,000
Tax Rate _ 30%
P255,000
‘without Allowance _——=—_—_—P300,000

“Tax with Allowance ace P270,000
Tax with Allowance at 150% 255,000
deduction

i. The government would just lose P15,000 in taxes but the employees
would be getting an extra P100,000 which they can use for utilities
and would help stimulate the economy.

}. We cannot require employers to provide for allowances in the tax code. It might
not be the proper place to insert such legislation.

3. These schemes will still benefit minimum wage earners and those earning below
P250K because with these incentives in place, the employer will no longer hesitate
in giving them allowances as we have effectively reduced the risk of making them
jump into a higher tax bracket. Employers, together with employees, sometimes
do not want to receive slight increases in their salary because it will move them
from a tax free bracket to an already taxable bracket. Hence even if they get a
salary increase, their net pay is reduced already now due to taxes. Without
proposal, this risk is removed, as the allowances are tax exempt.

6. Employers are not forced to provide for the allowances. But if they do, it is tax
deductible for them.

w