NINETEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES )
First Regular Session 
)
SENATE
S.B. No. Ill
Senate
of tii? e>?frptary
•22 JUL-7 P2-42
^"L.VcDBY;
Introduced by Senator Maria Lourdes Nancy S. Binay
AN ACT EXCLUDING 13th MONTH PAY FROM THE COMPUTATION 
OF TAXABLE INCOME, AMENDING FOR THIS PURPOSE SECTION 
32 (B)(7)(e) OF THE NATIONAL INTERNAL REVENUE CODE OF 
1997, AS AMENDED
EXPLANATORY NOTE
The 13th month pay is a mandatory benefit given to employees at the end of 
year. It was introduced under Presidential Decree 851 to further protect the level of 
real wages from the ravage of worldwide inflation, as well as for the working masses 
to properly celebrate Christmas and New Year. 
x ^
The Constitution provides that the State shall promote a just and dynamic social 
order that will ensure the prosperity and independence of the nation and free the 
people from poverty through policies that provide adequate social services, promote 
full employment, a rising standard of living, and an improved quality of life for all.
In line with the above State policy and the intent of the law in providing for 
13th month pay to all employees, this bill seeks to exclude the 13th month pay from 
the computation of taxable income amending for the purpose Section 32 (B)(7)(e) of 
the National Internal Revenue Code of 1997, as amended. This would help cushion 
the diminishing purchasing power of employees and workers both in the private and 
public sector thereby increasing their disposable income.
The amount to be excluded from the computation of taxable income would 
mean greater financial flexibility for employees and would put more food on the table 
and help ensure their children's education.
In these turbulent times of health crisis and exponential rise in oil prices and 
basic commodities, every peso counts to the working masses. The considerable 
amount spared from taxes would mean they will have more to spend for the 
necessities of their families.


In viev/ of the foregoing, the passage of this bill is earnestly sought.
MARIA LOURDES NANCY S. BINAY
lANCY S.


NINETEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES )
First Regular Session 
)
Senate
of t!)t
•22 JUL-7 P2:42
SENATE
Introduced by Senator Maria Lourdes Nancy S. Binay
1
2
3
4
5
6
7
8 
9
10
11
12
13
14
15
16
17
18
19
20 
21 
22
23
24
25
26
27
28
29
30
31
32
33
34
35
AN ACT EXCLUDING 13th MONTH PAY FROM THE COMPUTATION 
OF TAXABLE INCOME, AMENDING FOR THIS PURPOSE SECTION 
32 (B)(7)(e) OF THE NATIONAL INTERNAL REVENUE CODE OF 
1997, AS AMENDED
Be it enacted by the Senate and House of Representatives of the Phiiippines in 
Congress assembied:
SECTION 1. Section 32 (B) (7) (e) of the National Internal Revenue Code of 
1997, as amended is hereby further amended to read as follows:
"Sec. 32. Gross Income. -
"(A) Generai Definition, - x x x
"(B) Exclusions from Gross Income, - x x x
"(1) XXX 
"(2) XXX
"(3) XXX 
"(4) XXX 
"(5) XXX
u(6) XXX
"(7) Miscellaneous items, - 
"(a) XXX
"(b) XXX


1
2
3
4
5
6
7
8 
9
10
11
12
13
14
15
16
17
18
19
20 
21 
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
"(c) XXX
"(d) XXX
"(e) 13th Month Pay [and Other Benefits]. - [Gross benefits] 
THIRTEENTH MONTH PAY received by officials and employees of public 
and private entities PURSUANT TO EXISTING LAWS, RULES AND 
REGULATIONS. [: Provided, however, That the total exclusion under this 
subparagraph shall not exceed ninety thousand pesos (P90/000) which shall 
cover:
(I) Benefits received by officials and employees of the national and 
local governments pursuant to Republic Act No. 6686;
(ii) Benefits received by employees pursuant to Presidential Decree No. 
851, as amended by Memorandum Order No. 28, dated August 13, 1986;
(lii) Benefits received by officials and employees not covered by 
Presidential Decree No. 851, as amended by Memorandum Order No. 28, dated 
3 August 13, 1986; and
(iv) Other benefits such as productivity incentives and Christmas 
bonus.]
"(F) 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 THOUSAND PESOS 
(P90,000) WHICH SHALL COVER:
(i) BENEFITS RECEIVED BY OFFICIALS AND EMPLOYEES OF THE 
NATIONAL AND LOCAL GOVERNMENTS PURSUANT TO REPUBLIC ACT 
NO. 6686;
(ii) BENEFITS RECEIVED BY OFFICIALS AND EMPLOYEES NOT 
COVERED BY PRESIDENTIAL DECREE NO. 851, AS AMENDED BY 
MEMORANDUM ORDER NO. 28, DATED AUGUST 13,1986; AND
(iii) OTHER BENEFITS SUCH AS PRODUCTIVITY INCENTIVES 
AND CHRISTMAS BONUS.
"(G)[(f)] XXX
"(H)[(g)] XXX
"(I)[(h)] X X x.#'


1
2
3
4
5
6
7
8 
9
10
11
SEC. 2. Implementing Rules and Regulations. - Within thirty (30) days from the 
effectivity of this Act, the Secretary of Finance shall promulgate the necessary 
implementing rules and regulations for its effective implementation.
SEC. 3. Repealing Clause. - All other laws, decrees, orders, issuances and rules 
26 and regulations or parts thereof inconsistent with this Act are hereby amended or 
repealed 27 accordingly.
SEC. 4. Effectivity. - This Act shall take effect fifteen (15) days after its 
publication either in the Official Gazette or In at least two (2) newspapers of general 
circulation.
Approved,