SIXTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
Third Regular Session 
S E N..AJ'.J!: 
S.B. G~~4. 
Introduced by Senator Poe 
AN ACT 
'1'; 
OCT 22 P 1 :5!l 
I- I '''-\'''.,) !"X'" 
' ... I., L. ".-'-U'" 
RESTRUCTURING THE INCOME BRACKETS AND RATES OF TAX IMPOSED ON 
TAXABLE INCOME OF INDIVIDUALS, AMENDING FOR THE PURPOSE 
SECTIONS 24, 32,33, 34 AND 350F THE 1997 NATIONAL INTERNAL REVENUE CODE 
OF THE PHILIPPINES, AS AMENDED 
EXPLANATORY NOTE 
Tax reform is urgently needed in our country. The Philippine tax law on individual income taxes 
has remained unchanged since 1997. In the meantime, consumer price index and inflation have 
lowered the purchasing power of most Filipinos. 
The present tax system is out of date, onerous, and out of sync with tax systems in integrating 
ASEAN region I . 
As reported, 
the government is utilizing the high income tax rate system to 
address the need for increased education and infrastructure spending. Ditto, accordingly, it is not 
adjusting the taxation because the "rising deficit would cause a potential downgrade by 
international ratings agencies, hence the unchanged income tax system. ,,2 
It is in this situation that this legislation is submitted, the income bracket has not been adjusted to 
inflation since the law was passed in 1997. 
The tax bracket should immediately be revised to 
include automatic adjustments of nominal figures with inflation. In the words of the Research 
Education and Institution Development (REID) Foundation, "those who were presumed to be high 
middle class and rich in the 1997, and therefore taxed heavily, are not the same income class today. 
They may be very much poor and most especially the middle income class. ,,3 
The Philippines has one of the highest tax rates in ASEAN. 
But when the ASEAN Economic 
Community (AEC) Blueprint was signed in 2007, Thailand and Vietnam reduced their tax rates 
to more attractive levels. The country should follow the example. 
The legislation is a counterpart version of the policy measure filed by Rep. Neri Colmenares in the 
House of Representatives and as reproduced from the same bill's Explanatory Note: A great 
majority of Filipinos would have to content themselves with meager salaries. Official data from 
the National Wages Productivity Commission show that as of January 2015, the daily minimum 
wage rate in Metro Manila, the highest nationwide, is at P466 per day, while the lowest is at P213 
received by agricultural and non-agricultural workers in the Hocos region. These translate to an 
1 Quoted from the article, "Why PH has 20d highest income tax in ASEAN?" written by Chrisee dela Paz, 
www.rappleLcom, Octber 1, 2015 
2 Ibid, www.rappleLcom 
'Ibid, quoting REID's Research Fellow Balbieran 


annual income of about P123,000 for minimum wage earners in Metro Manila and about P56,232 
for the IIocos region. 
While a minimum wage earner is tax-exempt, such dismal levels of income are stilI way below the 
Family Living Wage or "the minimum amount needed by a family of six members to meet its daily 
food and non-food needs, plus a 10 percent allocation for savings." As of August 2014, Family 
Living Wage is at PI,086 daily (P396,390 annually) as shown by independent think-tank Ibon 
Foundation estimates. Compounding such situation is the prevailing tax system where by getting 
additional income no matter how small in excess of the minimum wage, the whole income now 
becomes taxable. 
Thus, the call to equitably adjust and restructure the income tax rates and tax brackets to provide 
immediate relief to individual taxpayers. 
The most immediate enactment of this legislation is earnestly sought. 
dt::7~ 
, f·~~CEPOE 


SIXTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
Third Regular Session 
Introduced by Senator Poe 
AN ACT 
''', 
~');,'" 
'15 
OCT Z2 P 1 :')0 
RESTRUCTURING THE INCOME BRACKETS AND RATES OF TAX IMPOSED ON 
TAXABLE INCOME OF INDIVIDUALS, AMENDING FOR THE PURPOSE SECTIONS 
24,32,33,34 AND 35 OF THE 1997 NATIONAL INTERNAL REVENUE CODE OF THE 
PHILIPPINES, AS AMENDED 
Be it enacted by the Senate and the House of Representatives of the Philippines in Congress 
assembled: 
1 
SECTION 1. 
It is observed in our jurisdiction that taxes is the lifeblood of the government and 
2 
that it should be just, equitable, progressive, uniform and must be a tool of social justice. As such, 
3 
the adjustment and restructuring of income tax rates and tax brackets must be advanced providing 
4 
economic relief to individual taxpayers. 
5 
6 
SECTION 2. Section 24 of the 1997 National Internal Revenue Code, as amended, is hereby 
7 
further amended to read as follows: 
8 
9 
"SEC. 24. Income Tax Rates. -
10 
11 
"(A) xxx 
12 
13 
"(1) xxx 
14 
15 
"(2) Rates of Tax on Taxable Income ofIndividuals. The tax shall be computed in accordance with 
16 
and at the rates established in the following schedule: 
17 
18 
19 
20 
21 
Not over P396,000 
Over P396,000but not overP640,000 
Over P640,000but not overPI ,000,000 
Over PI,OOO,OOO but not overPI,650,000 
Over Pl,650,000but not over P2,700,000 
Over P2,700,000 
Exempt 
10% of the excess over P396,000 
P24,400 + 15% of the excess over P640,000 
P78,400 + 20% of the excess over PI,OOO,OOO 
P208,400 + 25% ofthe excess over PI,650,000 
P470,900 + 30% of the excess over 
P2,700,000 
22 
"PROVIDED, THAT EVERY THREE (3) YEARS THEREAFTER, THE AMOUNTS HEREIN 
23 
STATED SHALL BE ADJUSTED TO THEIR PRESENT VALUE USING THE CONSUMER 
24 
PRICE INDEX, AS PUBLISHED BY THE PHILIPPINE STATISTICS AUTHORITY. 
1 


1 
~'xxx 
2 
3 
"[Provided, That minimum wage earners as defined in section 22 (HH) of this Code shall be 
4 
exempt from the payment of income tax on their taxable income: Provided, fnrther, That the 
5 
holiday pay, overtime pay, night shift differential pay and hazard pay received by such minimum 
6 
wage earners shall likewise be exempt from income tax.] 
7 
8 
9 
xxx." 
10 
11 
SECTION 3. Section 32 of the 1997 National Internal Revenue Code, as amended, is hereby 
12 
further amended to read as follows: 
13 
14 
"SEC. 32. Gross Income. -
15 
16 
17 
"(A) xxx 
18 
19 
"(B) xxx 
20 
21 
22 
"(I) xxx 
23 
24 
25 
"xxx 
26 
27 
28 
"(7) Miscellaneous Items. -
29 
30 
31 
"(a) xxx 
32 
33 
34 
"xxx 
35 
36 
37 
38 
"[(e) 13th Month Pay and Other Benefits. - Gross benefits received by officials and employees of 
39 
public and private entities: Provided, however, That the total exclusion under this subparagraph 
40 
shall not exceed Thirty thousand pesos (P30,OOO) which shall cover: 
41 
42 
"(i) Benefits received by officials and employees ofthe national and local government pursuant to 
43 
Republic Act No. 6686; 
44 
45 
"(ii) Benefits received by employees pursuant to Presidential Decree No 851, as amended by 
46 
Memorandum Order No. 28, dated August 13, 1986; 
47 
48 
"(iii) Benefits received by officials and employees not covered by Presidential Decree No 85 I, as 
49 
amended by Memorandum Order No. 28, dated August 13,1986; 
50 
51 
"(iv) Other benefits such as productivity incentives and Christmas bonus: Provided, further, That 
52 
the ceiling of Thirty thousand pesos (P30,OOO) may be increased through rules and regulations 
53 
issued by the Secretary of Finance, upon recommendation of the Commissioner, after considering, 
54 
among others, the effect on the same of the inflation rate at the end of the taxable year.] 
55 
56 
"[(f) GSIS, SSS, Medicare, and Other Contributions. - GSIS, SSS, Medicare and Pag-Ibig 
57 
contributions, and union dues of individuals.] 
2 


1 
2 
3 
4 
5 
6 
7 
8 
9 
"[(g)] (e) Gains from Sale of Bonds, Debentures or other Certificate of Indebtedness. - Gains 
realized from the sale or exchange or retirement of bonds, debentures or other certificate of 
indebtedness with a maturity of more than five (5) years. 
"[(h)] (f) Gains from Redemption of Shares in Mutual Fund. - Gains realized by the investor upon 
redemption of shares of stock in a mutual fund company as defined in Section 22(BB) of this Code. 
xxx." 
10 
SECTION 4. Section 33 of the 1997 National Internal Revenue Code, as amended, is hereby 
11 
further amended to read as follows: 
12 
13 
"SEC. 33. Special Treatment of Fringe Benefits. -
14 
15 
"(A) Imposition of Tax. - A final tax of [thirty-four percent (34%) effective January I, 1998; 
16 
thirty-three percent (33%) effective January 1, 1999; and thirty-two percent (32%) effective 
17 
January 1,2000 and thereafter,]THIRTY PERCENT (30%) is hereby imposed on the grossed-up 
18 
monetary value of fringe benefit furnished or granted to the employee [(except rank-and-file 
19 
employees as defined herein)] by the employer, whether an individual or a corporation (unless the 
20 
fringe benefit is required by the nature of, or necessary to the trade, business or profession of the 
21 
employer, or when the fringe benefit is for the convenience or advantage of the employer). The 
22 
tax herein imposed is payable by the employer which tax shall be paid in the same manner as 
23 
provided for under Section 57(A) of this Code. The grossed-up monetary value ofthe fringe benefit 
24 
shall be determined by dividing the actual monetary value of the fringe benefit by [sixty-six percent 
25 
(66%) effective January 1, 1998; sixty-seven percent (67%) effective January 1, 1999; and sixty-
26 
eight percent (68%)effective January 1, 2000 and thereafter:]SEVENTY PERCENT (70%): 
27 
Provided, however, That fringe benefit furnished to employees and taxable under Subsections (B), 
28 
(C), (D) and (E) of Section 25 shall be taxed at the applicable tax imposed thereat: Provided, 
29 
further, That the grossed-up MONETARY value of the fringe benefit shall be determined by 
30 
dividing the actual monetary value of the fringe benefit by the difference between one hundred 
31 
percent (100%) and the applicable rates of income tax under Subsections (B), (C), (D) and (E) of 
32 
Section 25. 
33 
34 
"(B) Fringe Benefits Defined. - For purposes of this Section, the term "fringe benefit" means any 
35 
good, service, or other benefit furnished or granted in cash or in kind by an employer to an 
36 
individual employee [(except rank-and-file employees as defined herein)] such as, but not limited 
37 
to, the following: 
38 
39 
"xxx 
40 
41 
"(C) Fringe Benefits Not Taxable. - The following fringe benefits are not taxable under this 
42 
Section: 
43 
44 
"(1) xxx 
45 
46 
"(2) xxx 
47 
48 
"[(3) Benefits given to the rank-and-file employees, whether granted under a collective bargaining 
49 
agreement or not; and] 
50 
51 
"[(4)] (3) De minimis benefits as defined in the rules and regulations to be promulgated by the 
52 
Secretary of Finance, upon recommendation of the Commissioner. 
53 
54 
xxx." 
55 
56 
SECTION 5. Section 34 of the 1997 National Internal Revenue Code, as amended, is hereby 
57 
further amended to read as follows: 
3 


, 
1 
"SEC:' 34. Deductions from Gross Income. - Except for taxpayers earning compensation income 
2 
arising' from personal services rendered under an employer-employee relationship where no 
3 
deductions shall be allowed under this section [other than under Subsection (M) hereof], in 
4 
computing taxable income subject to income tax under Sections 24(A); 25(A); 26; 27(A), (B) and 
5 
(C); and 28(A)(l), there shall be allowed the following deductions from gross income: 
6 
7 
"(A) xxx 
8 
9 
"xxx 
10 
11 
"[(L) Optional Standard Deduction. - In lieu of the deductions allowed under the preceding 
12 
Subsections, an individual subject to tax under Section 24, other than a nonresident alien, may 
13 
elect a standard deduction in an amount not exceeding forty percent (40%) of his gross sales or 
14 
gross receipts, as the case may be. In the case of a corporation subject to tax under section 27(A) 
15 
and 28(A)(l), it may elect a standard deduction in an amount not exceeding forty percent (40%) 
16 
of its gross income as defined in Section 32 of this Code. Unless the taxpayer signifies in his return 
17 
his intention to elect the optional standard deduction, he shall be considered as having availed 
18 
himself of the deductions allowed in the preceding Subsections. Such election when made in the, 
19 
return shall be irrevocable for the taxable year for which the election is made: Provided, That 'an' 
20 
individual who is entitled to and claimed for the optional standard deduction shall not be required 
21 
to submit with his tax return such financial statements otherwise required under this Code: 
22 
Provided, further, That except when the Commissioner otherwise permits, the said individual shall 
23 
keep such records pertaining to his gross sales or gross receipts, or the said corporation shall keep, 
24 
such records pertaining to his gross income as defined in Section 32 ofthis Code during the taxable 
25 
year, as may be required by the rules and regulations promulgated by the Secretary of Finance, 
26 
upon recommendation of the Commissioner.] 
27 
28 
"[(M) Premium Payments on Health and/or Hospitalization Insurance of an Individual Taxpayer. 
29 
- The amount of premiums not to exceed Two thousand four hundred pesos (P2,400) per family 
30 
or Two hundred pesos (P200) a month paid during the taxable year for health andlor hospitalization 
31 
insurance taken by the taxpayer himself, including his family, shall be allowed as a deduction from 
32 
his gross income: Provided, That said family has a gross income of not more than Two hundred 
33 
fifty thousand pesos (P250,OOO) for the taxable year: Provided, finally, That in the case married 
34 
taxpayers, only the spouse claiming the additional exemption for dependents shall be entitled to 
35 
this deduction.] 
36 
37 
xxx." 
38 
39 
SECTION 6. Section 35 of the 1997 National Internal Revenue Code, as amended, is hereby 
40 
deleted and in its place, a new Section 35 is inserted to read as follows: 
41 
42 
"SEC. 35. OPTIONAL STANDARD DEDUCTION. - IN LIEU OF THE DEDUCTIONS 
43 
ALLOWED UNDER THE PRECEDING SECTION, AN INDIVIDUAL SUBJECT TO TAX 
44 
UNDER SECTION 24, OTHER THAN A NONRESIDENT ALIEN, AND A CORPORATION 
45 
SUBJECT TO TAX UNDER SECTION 27(A) AND 28(A)(l), MAY ELECT A STANDARD 
46 
DEDUCTION IN AN AMOUNT NOT EXCEEDING FORTY PERCENT (40%) OF ITS GROSS 
47 
INCOME AS DEFINED IN SECTION 32 OF THIS CODE. UNLESS THE TAXPAYER 
48 
SIGNIFIES IN HIS RETURN HIS INTENTION TO ELECT THE OPTIONAL STANDARD 
49 
DEDUCTION, HE SHALL BE CONSIDERED AS HAVING AVAILED HIMSELF OF THE 
50 
DEDUCTIONS ALLOWED IN THE PRECEDING SUBSECTIONS. SUCH ELECTION WHEN 
51 
MADE IN THE RETURN SHALL BE IRREVOCABLE FOR THE TAXABLE YEAR FOR 
52 
WHICH THE ELECTION IS MADE: PROVIDED, THAT AN INDIVIDUAL WHO IS 
53 
ENTITLED TO AND CLAIMED FOR THE OPTIONAL STANDARD DEDUCTION SHALL 
54 
NOT BE REQUIRED TO SUBMIT WITH HIS TAX RETURN SUCH FINANCIAL 
55 
STATEMENTS OTHERWISE REQUIRED UNDER THIS CODE: PROVIDED, FURTHER, 
56 
THAT EXCEPT WHEN THE COMMISSIONER OTHERWISE PERMITS, THE SAID 
57 
INDIVIDUAL OR CORPORATION SHALL KEEP SUCH RECORDS PERTAINING TO HIS 
4 


1 
GROSS INCOME AS DEFINED IN SECTION 32 OF THIS CODE DURING THE TAXABLE 
2 
YEAR, AS MAYBE REQUIRED BY THE RULES AND REGULATIONS PROMULGATED 
3 
BY 
THE 
SECRETARY 
OF 
FINANCE, 
UPON 
RECOMMENDATION 
OF 
THE 
4 
COMMISSIONER. 
5 
6 
SECTION 7. Repealing Clause. - All laws, executive and administrative orders or parts thereof, 
7 
inconsistent with any provision of this Act are hereby repealed or modified accordingly. 
8 
9 
SECTION 8. Effectivity. - This Act shall take effect after fifteen (15) days following the 
10 
completion of its publication in the Official Gazette or in a national newspaper of general 
11 
circulation. 
12 
13 
14 
Approved, 
15 
16 
5