Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila
Sixteenth Congress

First Regular Session

House Bill No. 2835

Introduced by Honorable Mar-Len Abigail's. Binay

EXPLANATORY NOTE

Enshrined in our Constitution are State policies intended to promote full
employment, a rising standard of living, and an improved quality of life for the Filipino
workers.

In line with these policies, laws have been enacted to provide, among others,
statutory benefits such as 13% month pay (Presidential Decree No. 851 as amended) and
Christmas bonus (Republic Act No. 6686 as amended) to aid the Filipino workers in their
plight for prosperity and a more comfortable life. Our laws have even gone further and
excluded these benefits from income tax, making such amounts received by the Filipino
worker tax-free, subject only to the limitation that only a maximum amount of P30,000 can
be excluded from the taxpayer's gross taxable income. Such exclusion from gross taxable
income was pegged at P30,000 in 1994. However, much has changed, from macro-economic
conditions to the basic salaries of employees, that there is a need to revisit the P30,000
maximum level imposed under Section 32 (B)(7)(e) of the National Internal Revenue Code.

Though the salaries of employees, whether in the private or public sector, have
significantly increased since 1994, the P30,000 exclusion granted upon these benefits have
remained stagnant for almost two (2) decades.

From the research of institutions such as the National Tax Research Center, the
National Economic Development Authority, and National Statistics Office, it is suggested
that the exclusion be increased from P30,000 to P75,000, subject to adjustment every three
(3) years.

The policies stated by our Constitution warrant the increase of the maximum
amount of 13 month pay and other benefits received by a Filipino worker that shall be
excluded from the gross taxable income. To be true to its policy of improving the lives of the
Filipino workers, and to allow an increasing standard of living, the benefits granted by the
government should not be thwarted by the passage of time and be negated by the change of
economic and other conditions. Instead it should be responsive to the needs of its people
whom it declares as Sovereign.

For the foregoing reasons, the passage of this bill is earnestly sought.

via S. BINAY



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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

Sixteenth Congress
First Regular Session

House Bill No. 2835

Introduced by: Rep. Mar-Len Abigail 8. Binay

AN ACT
INCREASING THE CEILING OF THE 13" MONTH PAY, CHRISTMAS BONUS AND
OTHER BENEFITS EXCLUDED FROM THE COMPUTATION OF GROSS INCOME,
FOR THE PURPOSE 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 House of Representatives of the Philippines in Congress
assembled:

SECTION I. Section 32 (B), Chapter VI of the National Internal Revenue Code of the
Philippines (R.A. No. 8424) is hereby amended as follows:

SEC. 32. Gross Income. —
(A) General Definition, - x x x
bee
(B) Exclusions from Gross Income. - The following items shall not be included
in gross income and shall be except from taxation under this title:
“exix:
4(7) Miscellaneous Items. —
“XXX
(c) 13 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 (P 30,000) SEVENTY-FIVE THOUSAND PESOS
(2 75,000) which shall cover:
(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


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No, 851, as amended by Memorandum Order No. 28, dated
August 13, 1986;

(iii) Benefits received by officials and employee 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) 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 YEARS AFTER
THE EFFECTIVITY OF THIS ACT AND EVERY THREE (3) YEARS
THEREAFTER, THE AMOUNT HEREIN STATED SHALL BE ADJUSTED
TO ITS PRESENT VALUE USING THE CONSUMER PRICE INDEX, AS
PUBLISHED BY THE NATIONAL STATISTIC OFFICE (NSO).

XXX,

SEC. 2. REPEALING CLAUSE. ~ All laws, decrees, resolutions, order or ordinance or
parts thereof inconsistent with this Act, are hereby repealed, amended or modified accordingly.

SEC. 3. EFFECTIVITY. — This Act shall take effect fifteen (15) days following its

publication in the Official Gazette or in at least two (2) newspapers of general circulation.

Approved,