" 
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SIXTEENTH CONGRESS OF THE 
) 
((lff.;. uflll' j,mt~" " 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
) 
'13 
J\3L -1 
P5 :21 
SENATE 
S. No. 256 
Introduced by Senator Ralph G. Recto," 
Explanatory Note 
Section 9, Article II of our Constitution states that: "The State shall promote a just and 
dynamic social order that will ensure the prosperity and independence of the nation and free the 
people from poverty through policies that provide adequate social services, promote full 
employment, a rising standard of living, and an improved quality of life for all." 
Corollary to this, it is also the State's policy to affIrm labor as a primary social economic 
force by protecting the rights of workers and promote their welfare. 
Because of these policies, our laws exclude the mandated 13th month pay and the 
Christmas bonus from the coverage of income taxes, but only up to the extent ofP30,OOO. Hence, 
the excess would form part of an individual's gross income and would be subject to the income 
tax. 
, 
SpecifIcally, Section 32 (B) (7) (e) of the National Internal Revenue CodJ, as amended 
exempts from income tax the benefIts found.under Presidential Decree No. 851 as amended by 
Memorandum Order No. 28 or the 13th Month Pay Law; Republic Act No. 6686 or the Law 
Authorizing the Giant of Christmas Bonus to National and Local Government OffIcials and 
Employees; and other benefits such as productivity incentives and other Christmas bonuses to 
the extent ofP30,OOO. 
The P30,OOO ceiling was fIrst introduced in 1994 upon the effectivity of Republic Act No. 
7833. At that time, the lowest monthly basic salary for government employees (Salary Grade 1, 
Step I) was P2,800 and that ofthe President of the Philippines (Salary Grade 33) was at P25,OOO. 
At present, the basic salaries have been adjusted such that SG-I Step I now stands at P9,000 and 
SG-33 is at PI20,000. 
While there have been increases in the legislated pay scale of private and government 
personnel, the P30,000 cap for the income tax exemption of the 13th month pay and Christmas 
bonuses have remained the same. This amount no longer mirrors prevailing circumstances. 
This bill therefore aims to increase that ceiling to P75,000 to make it more responsive to 
the needs of the times. If adjustments for inflation were reckoned from 1994, the National Tax 
Research Center (NTRC) and National Economic Development Authority (NEDA) peg the 
exemption ceiling estimates as of2011 at P72,OOOl and P75,0002 respectively. 
Furthermore, the bill also provides that the ceiling of P75,OOO shall be adjusted to its 
present value using the Consumer Price Index (CPI) as published by the National Statistics 
OffIce (NSO), three years after the measure's effectivity and every three years thereafter. 
I NTRC position paper dated 23 March 2011 
2 NEDA position paper dated 06 February 2012 


The law should always be responsive to the needs of the people. An increase in the 
ceiling of the 13th Month Pay and other benefits to be exempted from income tax is one of the 
reliefs the people need during these hard times. 
Due to the foregoing, the passage of this measure is sincerely sought. 
le/ev 


SIXTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
) 
SENATE 
S. No, 
256 
Introduced by Senator Ralph G. Recto 
AN ACT 
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(.ff,;. vi t~dhmtM~ 
'13 
JUL -1 P5:21 
INCREASING THE CEILING OF THE 13TH MONTH PAY, CHRISTMAS BONUS 
AND OTHER BENEFITS EXCLUDED FROM THE COMPUTATION OF GROSS 
INCOME FOR THE PURPOSES 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 the House of Representatives of the Philippines in 
Congress assembled: 
I 
Section 1. Section 32 (B), Chapter VI of the National Internal Revenutl Code of the 
2 
Philippines (R.A. No. 8424) is hereby amended as follows: 
3 
SEC. 32. Gross Income. -
4 
"(A) General Definition. - xxx 
5 
H xxx 
6 
(B) Exclusions from Gross Income. - The following items shall not be included in 
7 
gross income and shall be exempt from taxation under this title: 
8 
"xxx 
9 
"(7) Miscellaneons Items. -
10 
"xxx 
II 
( e) 13th Month Pay and Other benefits. - Gross benefits received by 
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officials and employees of public and private entities: Provided, however, That 
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the total exclusion under this subparagraph shall not exceed [Thirty thousand 
14 
pesos (P 30,000)] SEVENTY-FIVE THOUSAND PESOS (P75,000) which 
15 
shall cover: 
16 
(i) 
Benefits received by officials and employees of the national 
17 
and local government pursuant to Republic Act No. 6686; . 
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1 
(ii) . Benefits received by employees pursuant to Presidential 
2 
Decree No. 851, as amended by Memorandum Order No. 28, 
3 
dated August 13, 1986; 
4 
(iii) Benefits received by officials and employees not covered by 
5 
Presidential decree No. 851, as amended by Memorandum 
6 
Order No. 28, dated August 13, 1986; and 
7 
(iv) Other benefits such as productivity incentives and Christmas 
8 
bonus: [Provided, further, That the ceiling of Thirty thousand 
9 
pesos (ll 30,000) may be increased through rules and 
10 
regulations issued by the Secretary of Finance, upon 
11 
recommendation of the Commissioner, after considering 
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among others, the effect on the same of the inflation rate at 
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the end of the taxable year.] 
14 
PROVIDED, THAT NOT LATER THAN THREE YEARS AFTER 
15 
THE EFFECTIVITY OF THIS ACT AND EVERY THREE (3) YEARS 
16 
THEREAFTER, 
THE 
AMOUNT 
HEREIN 
STATED 
SHALL 
BE 
17 
ADJUSTED TO ITS PRESENT VALUE USING THE CONSUMER PRICE 
18 
INDEX, AS PUBLISHED BY THE NATIONAL STATISTICS OFFICE 
19 
(NSO). 
20 
"xxx." 
, 
21 
SEC. 2. Repealing Clause. - All laws, decrees, resolutions, orders or ordinances or parts 
22 
thereof inconsistent with this Act, are hereby repealed, amended or modified accordingly. 
23 
SEC. 3. Effectivity. - This Act shall take effect fifteen (15) days after its publication in 
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the Official Gazette or in at least two (2) newspapers of general circulation. 
Approved, 
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