EIGHTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
)
S E N A T E  
S. No. 
602
O rn a te
of ll)r & i'frrln rj»
'19 
JUL 17 
P6 :14
Introduced by Senator Ralph G. Recto
R E C tiV .D fiV :
AN ACT
EXCLUDING THE PERFORMANCE-BASED BONUS FROM THE COMPUTATION 
OF TAXABLE INCOME AMENDING FOR THIS PURPOSE SECTION 32 (B) (7) 
OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED
EXPLANATORY NOTE
Government is a machine whose parts should move in unison towards the 
attainment of its strategic goals as reflected in its development plans. This 
machinery is judged by the people through its outputs in terms of delivery of goods 
and services. However, the best-crafted strategic development plans will be for 
naught if civil servants who will implement these are not inspired and committed to 
achieve the plans.
To systematize monitoring, government evaluates the performance of its 
agencies as embodied in three monitoring tools: (1) the Organizational Performance 
Indicator Framework (OPIF) by the Department of Budget and Management (DBM); 
(2) the Strategic Performance Management System (SPMS) of the Civil Service 
Commission (CSC); and (3) the Results-Based Performance Monitoring System 
(RBPMS) as provided by Executive Order No. 80 issued on July 20, 2012.
Recognizing that the performance of each agency is the result of the service 
rendered by employees, the government deemed it necessary to reward exemplary 
work through Executive Order No. 80, Directing the Adoption of a Performance- 
Based Incentive System for Government Employees. It provided for the grant of the 
Performance-Based Bonus (PBB) on top of the Productivity Enhancement Incentive 
(PEI). While the PEI is granted to all government employees across-the-board at the


uniform rate of Five Thousand Pesos (P5,000.00) each, the PBB depends on the 
rating that the agency received and the employee's performance rating.
With the issuance of Executive Order No. 201 on February 19, 2016, the 
existing PBB granted to qualified government personnel, including those in local 
government units (LGUs), is enhanced to strengthen its results orientation, to be 
given in an amount equivalent to one (1) month basic salary up to two (2) months 
basic salary, to be implemented in two (2) phases starting in FY 2017. The PBB shall 
be subject to the achievement by departments or agencies, including LGUs and 
individual employees of their performance targets or commitments and compliance 
with good governance and other conditions. The grant of the enhanced PBB shall be 
based on a progressive rate system. As the position and responsibility in improving 
agency performance becomes higher, so is the amount of PBB granted.
As formulated, the PBB should be an effective reward for exemplary work. 
Flowever, under the Tax Code, it shall be subject to income tax, thereby reducing its 
monetary value. To grant government employees full recognition and enjoyment of 
their reward for exemplary performance, this proposed measure seeks to exclude 
the PBB granted to qualified government personnel from the computation of taxable 
income by amending for the purpose Section 32 (B) (7) of the National Internal 
Revenue Code of 1997, as amended.
The PBB must be granted in its full amount and should not be subjected to 
income tax to serve as a meaningful reward for employees who walked the extra 
mile towards the attainment of agency goals and, on the other hand, as a 
motivational tool for agencies and employees rated "Poor" to improve their 
performance.
Hence, immediate passage of this bill is earnestly sought.
/jiao
LPH or


EIGHTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
)
S EN A T  E
602
S. No.
^ tn a tz
af ibr ft'i trftnrp
*‘ 9 
II!. 17 P6 :14
Introduced by Senator Ralph G. Recto
AN ACT
EXCLUDING THE PERFORMANCE-BASED BONUS FROM THE COMPUTATION 
OF TAXABLE INCOME AMENDING FOR THE PURPOSE SECTION 32 (B) (7) 
OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED
Be it enacted by the Senate and House o f Representatives o f the Philippines in 
Congress assembled:
1 
Section 1. 
Section 32 (B) (7) of the National Internal Revenue Code of
2 
1997, as amended, is hereby further amended to read as follows:
3 
"Sec. 32. 
Gross Income. -
4 
"(A) 
General Definition. -  x x x
5 
"(B) 
Exclusions from Gross Income, - x x x
6 
"(1) x x x
7 
"(2) x x x
8 
"(3) x x x
9 
"(4) x x x
10 
"(5) x x x
11 
"(6) x x x
12 
"(7 ) 
Miscellaneous item s.-
13 
"(a) x x x
14 
"(b) x x x
15 
"(c) x x x
16 
"(d) x x x
17 
"(e) x x x


1 
"(F) PERFORMANCE-BASED BONUS (PBB) GRANTED TO
2 
QUALIFIED GOVERNMENT PERSONNEL;
3 
"  [ ( ^ ]  (G) X X X
4 
” [(§)] (H) XXX
5 
" 
(I)  X X X."
6 
Sec. 2. 
Implementing Rules and Regulations. -  Within thirty (30) days from
7 
the effectivity of this Act, the Department of Finance (DOF), Department of Budget
8 
and Management (DBM), and the Civil Service Commission (CSC), shall promulgate
9 
the necessary implementing rules and regulations for its effective implementation.
10 
Sec. 3. 
Repealing Clause. -  All other laws, decrees, orders, issuances and
11 
rules and regulations or parts thereof inconsistent with this Act are hereby amended
12 
or repealed accordingly.
13 
Sec. 4. 
Effectivity. -  This Act shall take effect fifteen (15) days after its
14 
publication either in the Official Gazette or in at least two (2) newspapers of general
15 
circulation.
Approved,