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SIXTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
First Regular Session 
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OCT 14 
1\11 :52 
SENATE 
S.B.No. 1838 
Introduced by Sen. Manuel "Lito" M. Lapid 
EXPLANATORY NOTE 
The proposed measure seeks to remove the maximum amount of thirteenth 
(13th) month pay and other benefits that are not included in the computation of gross 
income subject to income tax. At present, the law allows a maximum amount of 
Php30,OOO to be excluded from taxable income under the National Internal Revenue 
Code of 1997. This cap has not only been stagnant since its enactment some 16 years 
ago but it also no longer supports the present economic thrust of the nation. 
The rising growth of the Philippine economy as well as the appreciation of the 
peso's value may be strengthened and supported by robust consumer spending. 
The Bangko Sentral ng Pilipinas has, according to reports, emphasized the role of 
household consumption as a key driver of further economic growth. As such, the 
State should enact measures that will promote household spending. In fact, in some 
foreign jurisdictions, nationals are given cash or spending vouchers by the 
government in order to encourage greater consumer spending. 
By removing the tax imposition on 13th month pay and other bonuses, such as 
Christmas bonuses, that. are customarily released at the end of the year, the 
household consumer is empowered to maximize his spending potential in the ever-
ready yuletide market. This measure creates a more inclusive approach to our 
country's ever-growing economy. Thus, the passage of the measure is earnestly 
sought. 
r 


SIXTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
First Regular Session 
SENATE 
S.B. No. 1838 
) 
) 
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Introduced by Sen. Manuel "Lito" M. Lapid 
AN ACT 
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OCT 14 
(\11 :52 
REMOVING THE CAP ON THE AMOUNT OF THIRTEENTH MONTH PAY 
AND OTHER BENEFITS TO BE EXCLUDED FROM GROSS INCOME, 
AMENDING FOR SUCH PURPOSE SECTION 32(B)(7)(e), CHAPTER VI OF 
REPUBLIC ACT NO. 8424, AS AMENDED, OTHERWISE KNOWN AS THE 
NATIONAL INTERNAL REVENUE CODE OF 1997 
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)(7)(e), Chapter VI of Republic Act No. 8424, as 
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amended, otherwise known as the National Internal Revenue Code of 1997, is hereby 
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amended accordingly: 
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"SEC. 32. (II) Exclusions from Gross Income. - The following 
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items shall not be included in gross income and shall be exempt from 
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taxation under this title: 
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xxx 
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(7) Miscellaneous Items. -
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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,OOO)1 which shall 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 (P30,OOO) 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.] 
XXX" 
SEC. 2. 
Repealing Clause. 
All laws, presidential decrees, executive 
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orders, rules and regulations, or portions thereof inconsistent with this Act are 
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hereby repealed or modified accordingly. 
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SEC. 3. 
Effectivity. This Act shall take effect fifteen (15) days after its 
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publication in two (2) newspapers of general circulation. 
Approved, 
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