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

‘Twentieth Congress
First Regular Session

HOUSE BILL NO. 4431

Introduced by Representative Johanne Monich G. Bautista

EXPLANATORY NOTE

Article II, Section 9 of the Constitution mandates the State to promote a just and
dynamic social order that will ensure the prosperity of the nation and free the people from
poverty through policies that provide a rising standard of living and an improved quality of life
for all. Moreover, Article XIII, Section 3 of the Constitution guarantees the right of workers to
a living wage.

Every Filipino works hard with the hope that their earnings will be enough to sustain
their families, secure their future, and allow them to live with dignity. Yet, for many Filipino
workers, the reality is different. Despite recent adjustments to the minimum wages, the rising
costs of basic goods and services continues to erode the purchasing power of these workers.

This bill seeks to restore balance and fairness to our tax system by giving Filipino
workers the much-needed financial relief they deserve. It adjusts income tax thresholds,
increases allowable exemptions, introduces additional deductions, and ensures that certain
compensations mandated by law remain untaxed. These reforms directly address the widening
gap between wages and the cost of living while making the income tax structure more
progressive and equitable. Moreover, by increasing the take-home pay of these workers, the
bill addresses not only a social welfare issue, but also simulates the local economy. An increase
in disposable income directly translates to a boost in consumption, which fuels economic
activity and livelihood creation. By passing this measure, Congress affirms its commitment to
a tax system that rewards hard work, uplifts families, supports enterprises, and fuels growth
from the ground up.

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

JOHA! ha Mh BAUTISTA

Representativé, TRABAHO Party-List


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

‘Twentieth Congress
First Regular Session

HOUSE BILL NO. _ 443

Introduced by Representative Johanne Monich G. Bautista

AN ACT AMENDING SECTIONS 24, 32, 33, 34, AND 109 OF REPUBLIC ACT NO.
8424, OTHERWISE KNOWN AS THE NATIONAL INTERNAL REVENUE CODE
OF 1997, AS AMENDED, AND FOR OTHER PURPOSES

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

TITLET
GENERAL PROVISIONS

SECTION 1. Short Title. — This Act shall be known as the “Wage Tax Adjustment
for Growth & Equity (WAGE) Act.”

SECTION 2. Declaration of Policy. — It is the declared policy of the State to provide
an equitable relief to a greater number of taxpayers and their families in order to improve levels
of disposable income and increase economic activity. Considering the growing income
disparity in the Philippines, the State shall increase income tax thresholds for individuals to
promote tax equity and provide economic relief to Filipino workers. Moreover, in view of the
rising cost of living expenses in the country, the State shall alleviate the tax burden on Filipino
workers by increasing the ceiling for the allowable tax exclusions and deductions under the
National Internal Revenue Code of 1997 (“NIRC”), as amended by Republic Act No. 10963,
otherwise known as the “Tax Reform for Acceleration and Inclusion (TRAIN).”

SECTION 3. Section 24 of the NIRC, as amended, is hereby further amended to read
as follows:

"Section 24, Income Tax Rates. -


"(A) Rates of Income Tax on Individual Citizen and Individual Resident Alien of the

Philippines. ~

“(Xxx

"(2) Rates of Tax on Taxable Income of Individuals. — The tax shall be computed in
accordance with and at the rates established in the following schedule:

“(a) Tax Schedule Effective January 1, [2048] 2026 until December 31, [2622]

2030:
"Not over [P250,000] P400,000

“Over [P259,000] P400,000 but
not over [P-490,000] P600,000

"Over [400,000] P600,000 but
not over [P866,666] P1,200,000

“Over [P860,606] P1,200,000

soso [2%] 10% of the excess over
[250,000] P400,000

«++++.[P30;000] P35,500 + [25%] 15%
of the excess over P400,000

[P130,000] P155,000 + [30%]

but not over [P2,000,000] 20% of the excess over [P800,000]
3,600,000 P1,200,000
"Over [P2,900,000] P3,600,000 _......[P 130,000] P723,000 + [32%]
but not over [P8,000,000] 25% of the excess over [P2,000,000]
P7,200,000 3,600,000
"OVER P7,200,000 BUT NOT __......P1,982,000 + 32% OF THE
OVER P14,400,000 EXCESS OVER P7,200,000
"Over [P8,000,000] _......[P2,410,000] P4,609,000 + [32%]
P 14,400,000 35% of the excess over [P8,000,000]

P14,400,000

XXX

“Provided, That minimum wage eamers as defined in Section 22(HH) of this

Code shall be exempt from the payment of income tax on their taxable income:
Provided, further, That the holiday pay, overtime pay, night shift differential pay, [and]
hazard pay, PREMIUM PAY ON REST DAYS AND SPECIAL DAYS, SHARE IN
THE SERVICE CHARGES, EARNED SICK, VACATION AND OTHER
LEAVE CREDITS CONVERTIBLE TO CASH, AND OTHER ADDITIONAL
COMPENSATION MANDATED BY LAW received by such minimum wage
carners shall likewise be exempt from income tax.

"SERVICE CHARGES SHALL REFER TO THE ADDITIONAL PAY
DISTRIBUTED AMONG EMPLOYEES AS PROVIDED UNDER
PRESIDENTIAL DECREE NO. 442, SERIES OF 1974, OTHERWISE KNOWN
AS THE “LABOR CODE OF THE PHILIPPINES,” AS AMENDED.


"(b) Rate of Tax on- Income of Purely Self-employed Individuals and/or
Professionals Whose Gross Sales or Gross Receipts and Other Non-operating Income
Does Not Exceed the Value-added Tax (VAT) Threshold as Provided in Section
109(BB). ~ Self-employed individuals and/or professionals shall have the option to
avail of an eight percent (8%) tax on gross sales or gross receipts and other non-
operating income in excess of [Fwo-hundredfify] FOUR HUNDRED Thousand
Pesos [(P250;60}] (P400,000) in lieu of the graduated income tax rates under
Subsection (A)(2)(a) of this Section and the percentage tax under Section 116 of this
Code."

SECTION 4. Section 32 of the NIRC, as amended, is hereby further amended to read
as follows:

“Section 32. Gross Income. ~
"(A) General Definition. — xx x

"(B) Exclusions from Gross Income. — x x x

XxX
"(1) Miscellaneous Items. ~
"@xxx

"XXX

"(¢) 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 [Ninety]
ONE HUNDRED TWENTY-FIVE Thousand Pesos [(?90;000)]
(P125,000), which shall cover:

"@ xxx

"XXX

KXX

"@) ADDITIONAL COMPENSATION REQUIRED BY LAW. - THE
AMOUNT REQUIRED BY LAW TO BE GIVEN TO EMPLOYEES
AS HOLIDAY PAY, PREMIUM PAY ON REST DAYS AND
SPECIAL DAYS, OVERTIME PAY, NIGHT SHIFT
DIFFERENTIAL PAY, HAZARD PAY, SERVICE CHARGES, AND
OTHER ADDITIONAL COMPENSATION MANDATED BY LA’
PROVIDED, THAT OVERTIME PAY EXCEEDING 01
HUNDRED THOUSAND PESOS (P100,000.00) SHALL BE
INCLUDED IN THE GROSS INCOME UNDER SECTION 32(A) OF
THIS CODE."



SECTION 5. Section 33 of the NIRC, as amended, is hereby further amended to read
as follows:

"Section 33. Special Treatment of Fringe Benefit. —

oF income taxunder Subsections B)-{C)-(D}-and{B} of Section 25,

"(A) IMPOSITION OF TAX, - EFFECTIVE JANUARY 1, [2048] 2026
AND ONWARDS, THE VALUE OF FRINGE BENEFIT FURNISHED OR
GRANTED BY THE EMPLOYER, WHETHER AN INDIVIDUAL OR A
CORPORATION, TO AN EMPLOYEE, EXCEPT THOSE CLASSIFIED AS
RANK-AND-FILE, SHALL BE INCLUDED IN THE COMPUTATION OF THE
EMPLOYEE'S GROSS INCOME, AND SHALL BE SUBJECT TO THE TAX
IMPOSED UNDER SUBSECTION (A) OF SECTION 24 OF THIS CODE.

"FRINGE BENEFITS THAT ARE (1) REQUIRED BY THE NATURE
OF, OR NECESSARY TO, THE EMPLOYER’S TRADE, BUSINESS, OR
PROFESSION, OR (II) PRIMARILY FOR THE CONVENIENCE OR
ADVANTAGE OF THE EMPLOYER, SHALL NOT BE INCLUDED.

"THE TAX ON FRINGE BENEFITS HEREIN IMPOSED IS PAYABLE
BY THE EMPLOYER, WHICH TAX SHALL BE PAID IN THE SAME
MANNER AS PROVIDED FOR UNDER SECTION 79(A) OF THIS CODE.

"PROVIDED, HOWEVER, THAT FRINGE BENEFIT FURNISHED TO
EMPLOYEES AND TAXABLE UNDER SUBSECTIONS (B), (C), (D) AND (E)
OF SECTION 25 SHALL BE TAXED AT THE APPLICABLE RATES
IMPOSED THEREAT: PROVIDED, FURTHER, THAT THE GROSSED-UP
MONETARY VALUE OF THE FRINGE BENEFIT SHALL BE DETERMINED
BY DIVIDING THE ACTUAL MONETARY VALUE OF THE FRINGE
BENEFIT BY THE DIFFERENCE BETWEEN ONE HUNDRED PERCENT
(100%) AND THE APPLICABLE RATES OF INCOME TAX UNDER
SUBSECTIONS (B), (C), (D), AND (E) OF SECTION 25.


"(B) Fringe Benefit Defined. -x x x

"(xxx

"“(C) Fringe Benefits Not Taxable. — x x x

"(I)xxx:

"(3) x x x; [and]

"(4) xx x; AND

"(5) LIFE OR HEALTH INSURANCE AND OTHER NON-LIFE

INSURANCE PREMIUMS OR SIMILAR AMOUNTS IN EXCESS
OF WHAT THE LAW ALLOWS.

Xxx’

SECTION 6. Section 34 of the NIRC, as amended, is hereby further amended to read

"Section 34. Deductions from Gross Income. —

"(A) Expenses. -

"(1) Ordinary and Necessary Trade, Business, or Professional Expenses. ~x x x
"(2) Expenses Allowable to Private Educational Institutions. - x x x

"(3) EXPENSES ALLOWABLE TO MICRO TAXPAYERS. - A MICRO
TAXPAYER, AS DEFINED UNDER SECTION 21 (B) OF THIS CODE,
SHALL BE ALLOWED A FIFTY PERCENT (50%) ADDITIONAL
DEDUCTION ON THE SALARIES, WAGES, AND OTHER FORMS OF
COMPENSATION PAID TO THE EMPLOYEES OF THE MICRO
TAXPAYER.

XXX

"(B) Interest. — x xx

"© Taxes. —

"(1) In General. —x x x

"XX


"(9) TAX CREDITS ON SPECIAL DISCOUNTS GRANTED TO PERSONS:
WITH DISABILITY, SENIOR CITIZENS, AND SOLO PARENTS. — THE
COST OF DISCOUNTS GRANTED TO PERSONS WITH DISABILITY AS
PROVIDED UNDER REPUBLIC ACT NO. 7277, AS AMENDED,
OTHERWISE KNOWN AS “MAGNA CARTA FOR PERSONS WITH
DISABILITY;” SENIOR CITIZENS UNDER REPUBLIC ACT NO. 9994,
OTHERWISE KNOWN AS THE “EXPANDED SENIOR CITIZENS ACT
OF 2010"; AND SOLO PARENTS UNDER REPUBLIC ACT NO. 8972, AS
AMENDED, OTHERWISE KNOWN AS THE “SOLO PARENTS'
WELFARE ACT OF 2000” MAY BE CLAIMED AS CREDITS AGAINST
THE NORMAL INCOME TAX DUE DURING THE SAME TAXABLE
YEAR THE DISCOUNT IS GRANTED.

"(D) Losses. —x xx

KXX

“(M) COST OF LIVING EXPENSES. - REASONABLE COST OF LIVING
EXPENSES INCURRED BY AN INDIVIDUAL TAXPAYER: PROVIDED,
SUCH EXPENSES ARE DIRECTLY NECESSARY FOR THE TAXPAYER’S
BASIC SUBSISTENCE AND DAY TO DAY LIVING. FOR PURPOSES OF
THIS ACT, COST OF LIVING EXPENSES SHALL INCLUDE, BUT NOT
LIMITED TO, BASIC FOOD AND NON-ALCOHOLIC BEVERAGES, RENT
OR REASONABLE HOUSING EXPENSES, UTILITIES INCLUDING
ELECTRICITY, WATER, AND BASIC COMMUNICATION EXPENSES,
ESSENTIAL CLOTHING, MEDICAL AND HEALTHCARE EXPENSES NOT
OTHERWISE REIMBURSED.

THE COST OF LIVING EXPENSES SHALL APPLY TO THE EXTENT THAT
SUCH EXPENSES DO NOT EXCEED TEN THOUSAND PESOS
(PHP10,000.00) A MONTH: PROVIDED, THAT THE AMOUNT OF TEN
THOUSAND PESOS (PHP10,000.00) MAY BE INCREASED THROUGH
RULES AND REGULATIONS ISSUED BY THE SECRETARY OF FINANCE,
UPON RECOMMENDATION OF THE COMMISSIONER, AFTER
CONSIDERING THE EFFECT ON THE SAME OF THE INFLATION RATE
AT THE END OF THE TAXABLE YEAR, AMONG OTHERS.

xx’
SECTION 7. Section 109 of the NIRC, as amended, is further amended to read as
follows:
"Section 109. Exempt Transactions, - x x x

(1) Subject to the provisions of subsection (2) hereof, the following transactions shall
be exempt from the value-added tax:

A) xxx


"(Q) Lease of residential unit with a monthly rental not exceeding Fifteen-thousand

D TWENTY THOUSAND PESOS (PHP20,000.00):

PROVIDED, THAT THE AMOUNT HEREIN STATED SHALL BE

ADJUSTED TO ITS PRESENT VALUES USING THE CONSUMER

PRICE INDEX, AS PUBLISHED BY THE PHILIPPINE STATISTI

AUTHORITY (PSA) EVERY THREE (3) YEARS BEGINNING
JANUARY 1, 2029;

"Xxx

"(CC) SALE OR LEASE OF GOODS OR PROPERTIES OR THE
PERFORMANCE OF SERVICES OTHER THAN THE
TRANSACTIONS MENTIONED IN THE PRECEDING PARAGRAPHS,
THE GROSS ANNUAL SALES DO NOT EXCEED THE AMOUNT OF
FOUR MILLION PESOS (PHP4,000,000.00): PROVIDED, THAT THE
AMOUNT HEREIN STATED SHALL BE ADJUSTED TO ITS
PRESENT VALUES USING THE CONSUMER PRICE INDEX, AS
PUBLISHED BY THE PHILIPPINE STATISTICS AUTHORITY (PSA)
EVERY THREE (3) YEARS BEGINNING JANUARY 1, 2029."

SECTION 8. Separability Clause. — If any provision of this Act is subsequently
declared invalid or unconstitutional, the other provisions hereof which are not affected thereby
shall remain in full force and effect.

SECTION 9. Repealing Clause. — Sections 24, 32, 33, 34, and 109 of Republic Act
No. 8424, otherwise known as the National Internal Revenue Code of 1997, as amended by
Republic Act No. 10963 are hereby repealed or modified accordingly. All laws, decrees,
executive order, and rules and regulations contrary to or inconsistent with the provisions of this,
Act are hereby likewise repealed or modified accordingly.

SECTION 10. Effecti This Act shall take effect fifteen (15) days from the date
of its publication in the Official Gazette or in a newspaper of general circulation.

Approved,