, ' 
SIXTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
) 
'13 
JUL -4 Am:1 7 
SENATE 
453 
S.No. __ _ 
Introduced by Senator Ralph G. Recto 
Explanatory Note 
Man does not work like a machine. He cannot work indefinitely. He needs ample time to 
rest and revitalize in order to prepare for another day's work, while making sure that he performs to 
the best of his abilities at all times. 
This is why labor laws in many countries prescribe a maximum number of wo\,k hours. The 
Philippine Labor Code prescribed the maximum hours of work for employees at eight (8) hours a day 
for six (6) consecutive days. If the employee works beyond eight (8) hours, the employer is required 
to pay additional compensation equivalent to the employee's regular wage plus at least twenty-five 
percent (25%) of his regular wage. If the employee renders overtime on a holiday or rest day, the rate 
is increased to thitty percent (30%)1. 
Employees in the government are also entitled to oveltime pay but they are governed by Civil 
Service laws and rules. 
An employee who renders overtime work puts in additional hours of work and requires 
greater physical and mental effort. Instead of being able to rest early and spend more time with his 
family, he is forced to extend his working hours to achieve management's goals. Thus, it is only 
fitting that he be properly compensated for additional work hours rendered. 
Unfortunately, compensation received for overtime work fonns part of an employee's taxable 
income. This not only limits the full enjoyment of an employee's monetary benefits due him for 
putting in more hours of work but also diminishes the value of the additional physical and mental 
effort he contributed. 
In order to give due recognition to the hours worked in excess of the prescribed maximum 
working hours, this bill seeks to exclude overtime pay from the computation of taxable income 
amending for the purpose Section 32 (B) (7) of Republic Act No. 8424, otherwise known as the 
"National Internal Revenue Code of 1997", as amended. 
This proposal will cost the government foregone revenues. However, more money in 
taxpayer's pocket will increase disposable income and boost consumer spending which in turn would 
trigger demand for more goods and services and thereby stimulate activities in the industrial and 
service sectors and generate more taxes. 
The proposed legislation is expected to benefit an estimated 3 7.7 M employees from the 
private and public sector. 
. 
Hence, immediate passage of this bill is earnestly sought. 
I Labor Code of the Philippines. 
2 
' 
October 2012 Labor Force Survey. 


, . 
SIXTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
) 
SENATE 
453 
S.No. __ _ 
Introduced by Senator Ralph G. Recto 
AN ACT 
,inu!t? 
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'13 
JUL -4 
1\10 :17 
~ 
0,1. 
EXCLUDING OVERTIME PAY FROM THE COMPUTATION OF TAXABLE 
INCOME AMENDING FOR THE PURPOSE SECTION 32 (8) (7) OF REPUBLIC ACT 
NO. 8424, OTHERWISE KNOWN AS 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) (7) of Republic No. 8424, otherwise known as 
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the "National Internal Revenue Code of 1997," as amended is hereby further amended to read as 
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follows: 
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"Sec. 32. 
Gross Income. -
"(A) 
General Definition. - x x x 
"(B) 
Exclusions from Gross Income. - x x x 
"(1)xxx 
"(2) x x x 
"(3) x x x 
"(4) xx x 
"(5) x x x 
. "(6)xxx 
"(7) 
Miscellaneous items. 
"(a) x x x 
"(b)xxx 
"(c)xxx 
"(d) xxx 
"(e) xxx 
"(F) OVERTIME PAY - COMPENSATION 
DUE TO HOURS WORKED IN EXCESS OF 
THE REQUIRED MAXIMUM WORKING 
. HOURS. 
"(G) [(f)] x x x 
"(H) [(g)] x x x 
"(I) [(h)] x x x." 
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SEC. 2. Implementing Rules and Regulations. - The Bureau of Internal Revenue (BIR), 
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Department of Finance (DoF), Department of Labor and Employment (DOLE), and Civil Service 
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Commission (CSC) shall promulgate not later that thirty (30) days upon the effectivity of this 
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Act the necessary rules and regulations for its effective implementation. 
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SEC. 3. Repealing Clause. -All other laws, decrees, orders, issuances and rules and 
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regulations or parts thereof inconsistent with this Act are hereby amended or repealed 
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accordingly. 
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SEC. 4. 
Effectivity. - This Act shall take effect fifteen (15) days after its publication 
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either in the Official, Gazette or in at least two (2) newspapers of generali circulation. 
Approved, 
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