FIFTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
) 
) 
) 
First Regular Session 
SENATE 
S.B. No. 2879 
Introduced by: Senator Ralph G. Recto 
Explanatory Note 
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JUN 14 
m1 :38 
Section 9, Article II of our Constitution states 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." 
Corollary to this, it is also the State's policy to affirm labor as a primary social economic 
force by protecting the rights of workers and promote their welfare. 
Because of these policies, our laws exclude the mandated 13th month pay and the 
Christmas bonus from the coverage of income taxes, but only up to the extent of P30,OOO. 
Otherwise, the excess would form part of an individual's gross income and would be subject to 
the income tax. 
Specifically, Section 32 (B) (7) (e) of the National Internal Revenue Code, as amended 
excludes from the income tax the benefits found under Presidential Decree No. 851 as amended 
by Memorandum Order No. 28 or the 13th month pay law; Republic Act No. 6686 or the law 
authorizing the grant of Christmas bonus to national and local government officials and 
employees; and other benefits such as productivity incentives and other Christmas bonuses to the 
extent ofP30,OOO. 
However, the amount set in our Tax Code as the ceiling for the said tax exemption does 
not mirror prevailing circumstances. The ceiling of P30,OOO for the exemption does not apply 
today as it did when it was incorporated in the tax code. 
This bill therefore aims to increase that ceiling and make it more responsive to the needs 
of the times. The measure sets the ceiling at P60,OOO, or approximately the equivalent amount of 
P30,OOO today taking into consideration inflation and other factors. 
The law should always be responsive to the needs of the people. An increase in the 
ceiling of this particular tax exemption is one of the reliefs the people need during these hard 
times. 
Due to the foregoing, the passage of this measure is sincerely sought. 


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FIFTEENTH CONGRESS OF THE REPUBLIC 
) 
{!~jhn' tlf h:c §.~'c,("bn.t 
OF THE PHILIPPINES 
) 
First Regular Session 
) 
'11 
.JUN 14 
I~ 1 :38 
SENATE 
S.B. No. 2879 
Introduced by: Senator Ralph G. Recto 
AN ACT 
INCREASING THE CEILING OF THE 13TH MONTH PAY, CHRISTMAS BONUS 
AND OTHER BENEFITS EXCLUDED FROM THE COMPUTATION OF GROSS 
INCOME FOR THE PURPOSES OF INCOME TAXATION, AMENDING FOR THE 
PURPOSE SECTION 32 (B), CHAPTER VI OF THE NATIONAL INTERNAL 
REVENUE CODE OF 1997, AS AMENDED 
Be it enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled: 
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Section 1. Section 32 (B), Chapter VI of the National Internal Revenue Code of the 
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Philippines (RA No. 8424) is hereby amended as follows: 
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SEC. 32. Gross Income. -
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"(A) General Definition. - xxx 
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"xxx 
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(B) Exclusions from Gross Income. - The following items shall not be included in gross 
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income and shall be exempt from taxation under this title: 
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"xxx 
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"(7) Miscellaneous Items. -
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"xxx 
II 
(e) 13'h Month Pay and Other benefits. - Gross benefits received by officials 
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and employees of public and private entities: Provided, however, That the 
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total exclusion under this subparagraph shall not exceed [Thirty thousand 
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pesos (1l30,000)] SIXTY THOUSAND PESOS (11 60,000) which shall 
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cover: 
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(i) 
Benefits received by officials and employees of the national and 
local government 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; 
(iii) 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: 
Provided, further, That the ceiling of [Thirty thousand pesos (P 30,000)] 
SIXTY THOUSAND PESOS (Jl60,OOO) may be increased through rules 
and regulations issued by the 
Secretary of Finance, upon 
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recommendation of the Commissioner, after considering among others, 
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the effect on the same of the inflation rate at the end of the taxable year. 
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"xxx." 
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Sec. 2. Repealing Clause. - All laws, decrees, resolutions, orders or ordinances or parts 
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thereof inconsistent with this Act, are hereby repealed, amended or modified accordingly. 
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Sec. 3. Effectivity. - This Act shall take effect fifteen (15) days after its publication in the 
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Offcial Gazette or in at least two (2) newspapers of general circulation. 
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Approved, 
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