SIXTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
) 
SENATE 
t152 
S.No. ___ _ 
Introduced by Senator Ralph G. Recto 
Explanatory Note 
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It is the policy of the State to 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. 
. 
It is with the same objective that this measure is being proposed. This bill seeks to 
exclude the 13th month pay and other benefits from the computation of taxable income amending 
for the purpose Section 32 (B) (7) (e) of Republic Act No. 8424, otherwise known as the 
"National Internal Revenue Code of 1997", as amended. This would _ help cushion the 
diminishing purchasing power of employees and workers both in the private and public sector 
thereby increasing their disposable income. 
This bill removes the taxability on benefits received by employees of public and private 
entities including those exceeding Thirty thousand pesos (P30,OOO). Hence, 13th month pay, 
productivity incentives and Christmas bonus, regardless of amount will now be totally excluded 
from the computation of'taxable income resulting in more financial resources for the workers. 
, 
The cap of P30,OOO as provided under the law not only limits the full enjoyment of 
workers and employees of additional monetary benefits but also diminishes the value of their 
equitable share in the fruits of production and undermines the employers' acts of generosity and 
recognition to their employees' work contributions. 
The amount to be excluded from the computation of taxable income would mean greater 
financial flexibility for employees and would put more food on the table and help ensure their 
children's education. 
The proposed legislation will benefit an estimated 37.7 M employees from the private 
and public sectorl. 
Hence, immediate passage of this bill is earnestly sought. 
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SIXTEENTH CONGRESS.OF THE 
) 
. (!&HI;r til trw j.tt'wnnru 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
) 
'13 
JUL -4 1'\10:1 7 
SENATE 
452 
s. No. __ --'--_ 
Introduced by Senator Ralph G. Recto 
AN ACT 
EXCLUDING 
13TH 
MONTH 
PAY 
AND 
OTHER 
BENEFITS 
FROM 
THE 
COMPUTATION OF TAXABLE INCOME AMENDING FOR THE PURPOSE 
SECTION 32 (B) (7) (e) 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) (e) 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)xxx 
"(5) x x x 
"(6)xxx 
"(7) 
Miscellaneous items. -
"(a)xxx 
"(b) x x x 
"(c) x x x 
"(d)xxx 
"(e) 
13th Month Pay and Other Benefits. -
IGross 
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) I 
which shall cover: 
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(i) 
(ii) 
Benefits received by officials and employees 
of the national and local governments 
pursuant to Republic Act No. 6686; 
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 
(P30,000) 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 ofthe 
taxable year]. 
"(f) x x x 
"(g) x x x 
"(h) x x x." 
SEC. 2. 
Implementing Rules and Regulations. - The Bureau of Internal Revenue 
(BIR), Department of Finance (DoF), and Department of Labor and Employment (DOLE) shall 
promulgate not later that thirty (30) days upon the effectivity of this Act the necessary rules and 
regulations for its effective implementation. 
SEC. 3. 
Repealing Clause. -
All other laws, decrees, orders, issuances and rules 
and regulations or parts thereof inconsistent with this Act are hereby amended or repealed 
accordingly. 
SEC. 4. 
Effectivity. - This Act shall take effect fifteen (15) days after its 
publication either in the Official Gazette or in at least two (2) newspapers of general circulation. 
Approved, 
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