.~~r;"i 
:,,', ,-
,'.Ii: ~lllf 'I f : ': - " 
't.:; \1 
SIXTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
) 
First Re&7Uiar Session 
) 
'13 
I~OV 21 
Pi' :;;:B 
SENATE 
s.No.1944 
ill.' 
! .. ' 
Introduced by Senator Ralph G. Recto 
Explanatory Note 
This bill seeks to amend Sections 32 and 33 of the National Internal Revenue Code 
(NIRC) of 1997, as amended, as follows: 
(a) Excluding from gross income the amounts received' by natural and juridical 
persons as indemnity for any loss or injury suffered; 
(b) Increasing the P30,000 cap for the income tax exemption of the 13th month pay 
and Christmas bonuses; 
( c) Incorporating a proviso on de minimis benefits into the NIRC of 1997; and 
(d) Removing the tax advantage of managerial employees over rank-and:file 
employees on fringe benefits. 
The role of human capital in developing the economy has been widely acknowledged. 
This is one of the reasons that Congress has enacted pro-labor laws such as Republic Act No. 
9504 which increased the basic personal exemption and exempted minimum wage earners from 
the payment of income tax. While our current tax system provides for some relief to our workers 
by reducing their income tax burden, it still needs to be enhanced to address other issues and 
concerns besetting the labor sector. 
Workers are sometimes compensated in the form of back wages, allowances and benefits 
by virtue of a labor dispute award. While it is clearly stated in Revenue Memorandum Circular 
No. 39-2012 that such renumerations are taxable, other amounts received by the worker as part 
of recoveries for physical and nonphysical injuries or damages obtained due to the dispute should 
not be treated as part of those renumerations. Moreover, other types of damages awarded by 
courts should also be explicitly included in the list of exclusions from gross income since these 
do not constitute part of the worker's rendered service to his employer. 
The P30,000 ceiling for the income tax exemption of the 13th month pay and Christmas 
bonuses first introduced in 1994 no longer mirrors prevailing circumstances. This bill, therefore, 
aims to increase said ceiling to P75,000 to make it more responsive to the needs of the times. 
The incorporation of the provision on de minimis benefits lifted from Revenue 
Regulations No. 5-2011 secures its continued implementation by institutionalizing it in the Tax 
Code. The ceiling amounts therein provided, however, are proposed to be adjusted every three 
years based on their current Consumer Price Index (CPI) values. 


The proposed removal of the tax advantage of managerial employees over rank-and-file 
employees with respect to fringe benefits is a move that would reduce the income divide between 
these groups of employees. More than ever, the words of President Ramon Magsaysay that those 
who have less in life should have more in law ring true. 
We owe it to our labor force to craft laws that ensure they get effectively what are due 
them by expanding and strengthening the mechanisms through which they can find relief from 
the taxes that take off significant amounts from their meager monthly take home pay. 
In view of the foregoing, immediate approval of this bill is earnestly sought. 
Ie J C v 


SIXTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
) 
·13 
NOV 21 
I' f' :/[\ 
SENATE 
S. No. 1944 
" 
,', 
Introduced by Senator Ralph G. Recto 
AN ACT 
PROVIDING TAX RELIEF TO THE LABOR SECTOR BY EXPANDING THE 
COVERAGE OF EXCLUSIONS FROM GROSS INCOME AND INCREASING THE 
AMOUNTS OF DE MINIMIS BENEFITS EXEMPT FROM TAX AMENDING FOR THE 
PURPOSE SECTIONS 32(B) AND 33 OF 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: 
1 
SECTION 1. Section 32(B) of the National Internal Revenue Code of 1997, as amended, 
2 
is hereby further amended to read as follows: 
3 
"Sec. 32. Gross Income. -
4 
"(A) xxx 
5 
"(B) Exclusions from Gross Income. - The following item~ shall not be included 
6 
in gross income and shall be exempt from tax under this Title: 
7 
"(I) xxx 
8 
"(2) xxx 
9 
"(3) xxx 
10 
"(4) xxx 
11 
"(5) DAMAGES AWARDED BY COURTS, BOARDS OR OFFICERS 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
EXERCISING JUDICIAL OR QUASI-JUDICIAL FUNCTIONS. -
AMOUNTS RECEIVED AS INDEMNITY BY NATURAL AND 
JURIDICAL 
PERSONS 
FOR 
ANY 
LOSS 
OR 
INJURY 
SUFFERED, SUCH AS, BUT NOT LIMITED TO: 
(A) DAMAGES 
RECEIVED 
AS 
COMPENSATION 
FOR 
PHYSICAL AND NONPHYSICAL INJURIES ACQUIRED 
DURING LABOR DISPUTES; 
(B) DAMAGES TO PERSONAL OR FAMILy' RIGHTS; 
, 
(C) DAMAGES FOR SLANDER AND LIBEL; 
(D) AWARD FOR LOSS OF LIFE; AND 
(E) DAMAGES FOR INJURIES TO THE GOODWILL OF A 
TAXPAYER'S 
BUSINESS, UNLESS 
THE AMOUNT 
AWARDED EXCEEDS THE VALUE OF GOODWILL. 
Page 1 of5 


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 
"[(5)] (6) xxx 
"[(6)] (7) xxx 
"[(7)J (8) Miscellaneous Items. -
"(a) xxx 
"(b) xxx 
"(e) xxx 
"(d) xxx 
"(e) 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 [Thirty thousand pesos 
(P30,000)] 
SEVENTY-FIVE 
THOUSAND 
PESOS 
(P75,OOO) which shall cover: 
"(i) xxx 
"(ii) xxx 
"(iii) xxx 
"(iv) Other benefits such as productivity incentives and 
Christmas bonus. [Provided, further, That the 
ceiling of Thirty thousand pesos (P 300,000) may be 
increased through rules and regulations issued by 
the Secretary of Finance, upon recommendation of 
the Commissioner, after considering among others, 
the effect on the same of the inflation rate at the 
end of the taxable year.] 
PROVIDED, THAT NOT LATER THAN THREE. (3) 
YEARS AFTER THE .EFFECTIVITY OF THIS ACT AND 
EVERY THREE (3) YEARS THEREAFTER, THE AMOUNT 
HEREIN STATED SHALL BE ADJUSTED TO ITS CURRENT 
VALUE AT THAT TIME USING THE CONSUMER PRICE 
INDEX, AS PUBLISHED BY THE NATIONAL STATISTICS 
OFFICE (NSO). 
"(t) xxx 
"(g) xxx 
"(h) xxx 
"(I) DE MINIMIS BENEFITS. - THESE SHALL BE LIMITED TO 
FACILITIES OR PRIVILEGES FURNISHED OR OFFERED 
BY 
AN 
EMPLOYER 
TO 
HIS 
EMPLOYEES, 
BOTH 
MANAGERIAL AND RANK-AND-FILE, THAT ARE OF 
RELA TIVEL Y SMALL VALUE AND ARE OFFERED OR 
Page 2 of5 


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 
FURNISHED BY THE EMPLOYER MERELY AS A MEANS 
OF 
PROMOTING 
THE 
HEALTH, 
GOODWILL, 
CONTENTMENT, OR EFFICIENCY OF HIS EMPLOYEES, 
SUCH AS, BUT NOT LIMITED TO, THE FOLLOWING: 
"(I) MONETIZED VALUE OF VACATION AND SICK 
LEAVE 
CREDITS 
PAID 
TO 
PRIVATE 
EMPLOYEES NOT EXCEEDING TEN (10) DAYS 
DURING THE YEAR; 
"(II) MONETIZED VALUE OF VACATION AND SICK 
LEAVE CREDITS PAID TO GOVERNMENT 
OFFICIALS AND EMPLOYEES; 
. . 
"(III) MEDICAL CASH ALLOWANCE TO DEPENDENTS 
OF 
EMPLOYEES 
NOT 
EXCEEDING 
NINE 
HUNDRED PESOS (P900) PER SEMESTER OR 
ONE HUNDRED FIFTY PESOS (PI50) PER 
MONTH; 
"(IV) RICE SUBSIDY OF TWO THOUSAND PESOS 
(P2,000) OR ONE (1) SACK OF 50-KG. RICE PER 
MONTH AMOUNTING TO NOT MORE THAN 
P2,000; 
"(V) UNIFORM AND CLOTHING ALLOWANCE NOT 
EXCEEDING FIVE THOUSAND PESOS (P5,000) 
PER ANNUM; 
"(VI) ACTUAL MEDICAL ASSISTANCE TO COVER 
MEDICAL 
AND 
HEALTH 
CARE 
NEEDS, 
ANNUAL MEDICAL! EXECUTIVE CHECK UP, 
MATERNITY 
ASSISTANCE, 
AND 
ROUTINE 
CONSULTATIONS, NOT EXCEEDING TWELVE 
THOUSAND PESOS (PI2,000) PER ANNUM; 
"(VII) LAUNDRY ALLOWANCE NOT ,EXCEEDING 
FIVE HUNDRED PESOS (P500) PER MONTH; 
"(VIII) EMPLOYEE ACHIEVEMENT AWARDS FOR 
LENGTH 
OF 
SERVICE 
OR 
SAFETY 
ACHIEVEMENT, WHICH MUST BE IN THE 
FORM OF A TANGIBLE PERSONAL PROPERTY 
OTHER THAN CASH OR GIFT CERTIFICATE, 
WITH AN ANNUAL MONETARY VALUE NOT 
EXCEEDING 
TWELVE 
THOUSAND 
PESOS 
(PI2,000) 
RECEIVED 
BY 
THE 
EMPLOYEE 
Page 3 of5 


1 
2 
3 
4 
5 
6 
7 
8 
9 
UNDER AN ESTABLISHED WRITTEN PLAN 
WHICH DOES NOT DISCRIMINATE IN FAVOR 
OF HIGHLY PAID EMPLOYEES; 
"(IX) GIFTS OR PRIZES GIVEN DURING CHRISTMAS 
AND 'MAJOR ANNIVERSARY CELEBRATIONS 
NOT EXCEEDING 
SIX 
THOUSAND 
PESOS 
(P6,000) PER EMPLOYEE PER ANNUM; 
"(X) DAILY MEAL ALLOWANCE FOR OVERTIME 
WORK 
NOT 
EXCEEDING 
TWENTY-FIVE 
10 
PERCENT (25%) OF THE BASIC MINIMUM 
11 
WAGE." 
12 
PROVIDED, THAT NOT LATER THAN THREE (3) 
13 
YEARS AFTER THE EFFECTIVITY OF THIS ACT AND 
14 
EVERY THREE (3) YEARS THEREAFTER, THE AMOUNTS 
15 
STATED UJ'!'DER SUBSECTIONS (III), (IV), ,(V), (VI), (VII), 
16 
(VIII), AND (IX) HEREIN SHALL BJ;: ADJUSTED TO THEIR 
17 
CURRENT 
VALUE 
AT 
THAT 
TIME 
USING 
THE 
18 
CONSUMER PRICE INDEX AS PUBLISHED BY THE 
19 
NATIONAL STATISTICS OFFICE (NSO). 
20 
"(J) FRINGE BENEFITS TO RANK-AND-FILE EMPLOYEES -
21 
BENEFITS GIVEN TO THE RANK-AND-FILE EMPLOYEES, 
22 
WHETHER 
GRANTED 
UNDER 
A 
COLLECTIVE 
23 
BARGAINING AGREEMENT OR NOT." 
24 
SEc.2. Section 33 of the National Internal Revenue Code of 1997, as amended, is hereby 
25 
further amended to read as follows: 
26 
"SEC. 33. Special Treatment of Fringe Benefits. -
27 
"(A) xxx 
28 
"(B) Fringe Benefit Defined. - For purposes of this Section, the term 'fringe 
29 
benefit' means any good, service or other benefit fiJrnished or granted in 
30 
cash or in kind by the employer to an individual employee [(except rank-
31 
and-file employees as defined herein)] such as, but not limited to, the 
32 
following: 
33 
34 
35 
36 
37 
38 
"(1) Housing; 
"(2) Expense account; 
"(3) Vehicle of any kind; 
"(4) Household personnel, such as maid, driver and others; 
"(5) Interest on loan at less than market rate to the extent of the 
difference between the market rate and actual rate granted; 
Page 4 of5 


I 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
IS 
16 
17 
18 
19 
20 
"(6) Membership fees, dues and other expenses borne by the employer 
for the employee in social and athletic clubs or other similar 
organizations; 
"(7) Expenses for foreign travel; 
"(8) Holiday and vacation expenses; 
"(9) Educational assistance to the employee or his dependents; and 
"(10) Life or health insurance and other non-life insurance premiums or 
similar amounts in excess of what the law allows. 
"(C) Fringe Benefits Not Taxable. - The following fringe benefits are not taxable 
under this Section: 
"(I) Fringe benefits which are authorized and exempted from tax under 
special laws; 
"(2) Contributions of the employer for the benefit of the employee to 
retirement, insurance and hospitalization benefit plans; 
"(3) Benefits given to the rank-and-file employees, whether granted 
under a collective bargaining agreement or not; and 
"(4) De minimis benefits as defined in [the rules and regulations to be 
promulgated by the Secretary of Finance, upon recommendation of 
the Commissioner] SECTION 32 HEREOF. 
"The Secretary of Finance is hereby authorized to promulgate, upon 
21 
recommendation of the Commissioner, such rules and regulations as are necessary 
22 
to carry out efficiently and fairly the provisions of this Section, taking into 
23 
account the peculiar nature and sp'ecial need of the trade, business or profession of 
24 
the employer." 
25 
SEC. 3. Implementing Rules and Regulations. - The Secretary of Finance shall promulgate 
26 
the necessary rules and regulations for the effective implementation of the provisions of this Act. 
, 
, 
27 
SEC. 4. Separability Clause. - If any provision of this Act is declared unconstitutional or 
, 
28 
invalid, other parts or provisions hereof not affected thereby shall continue to be in full force and 
29 
effect. 
30 
SEC. 5. Repealing Clause. - All laws, orders, issuances, circulars, rules and regulations or 
31 
parts thereof, which are inconsistent with the provisions of this Act are hereby repealed or 
32 
modified accordingly. 
33 
SEC. 6. Effectivity. - This Act shall take effect fifteen (15) days after its pUblicatio'n in the 
34 
Official Gazette or in at least two (2) newspapers o(general circulation. 
Approved, 
Page 5 of5