EIGHTEENTH CONGRESS OF THE)
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

Introduced by Rep. Vilma Santos-Recto
6" District of Batangas

AN ACT
EXCLUDING 13™ 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

Itis the policy of the State to 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.

It is with the same objective that this measure is being proposed. This bill seeks to
exclude the 13" month pay from the computation of taxable income amending for the
purpose Section 32 (B) (7) (¢) 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 intent of the law in providing for a mandatory 13" month pay to all employees is
to provide the working masses additional income in time for the celebration of Christmas and
New Year. Therefore, subjecting the same to income tax would defeat the very purpose of the
law.

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.

The proposed legislation will benefit an estimated 42.2 million employees from the

private and public sector’.

Hence, immediate passage of this bill is ea

" April 2019 Labor Force Survey.


EIGHTEENTH CONGRESS OF THE )
REPUBLIC OF THE PHILIPPINES —)

First Regular Session )
HOUSE OF REPRESENTATIVES
H.B.No._3444

Introduced by Rep. Vilma Santos-Recto
6" District of Batangas

AN ACT
EXCLUDING 13™ MONTH PAY FROM THE COMPUTATION OF TAXABLE
INCOME, AMENDING FOR THIS PURPOSE SECTION 32 (B) (7) (ec) OF THE
NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED

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

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) General Definition. —x x x

“(B) Exclusions from Gross Income. —xx x

(I) xxx

Q) xxx

43) xxx

“AYXXX

“(S)Xxx

“(6)Xxx

“(7) Miscellaneous items. -

“(a)xxx

“(b) xxx

S(C)XXX

“@) xxx

“(e) 13" 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


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this subparagraph shall not exceed ninety thousand pesos (P90,000) which
shall cover:

() 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;
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

(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 (P 90,000) WHICH SHALL COVER:

() BENEFITS RECEIVED BY OFFICIALS AND
EMPLOYEES OF THE NATIONAL AND LOCAL GOVERNMENTS
PURSUANT TO REPUBLIC ACT NO. 6686;

(i) 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
OTHER BENEFITS SUCH AS PRODUCTIVITY
INCENTIVES AND CHRISTMAS BONUS.
“GIO xxx
“(DIO Xxx
“@Ihy] xxx.”
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 and regulations or parts thereof inconsistent with this Act are hereby amended or

repealed accordingly.


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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,