EIGHTEENTH CONGRESS OF THE )

REPUBLIC OF THE PHILIPPINES )
First Regular Session )
HOUSE OF REPRESENTATIVES
4359
H.B. No.

Introduced by Rep. Vilma Santos-Recto
6" District of Batangas

AN ACT
PROVIDING TAX RELIEF TO THE LABOR SECTOR BY EXPANDING THE
COVERAGE OF EXCLUSIONS FROM GROSS INCOME AND INCREASING THE
AMOUNTS OF DE MINIMIS BENEFITS EXEMPT FROM TAX AMENDING FOR
THE PURPOSE SECTIONS 32(B) AND 33 OF THE NATIONAL INTERNAL
REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES

Explanatory Note

This bill seeks to amend Sections 32 and 33 of the National Internal Revenue Code
(NIRC) of 1997, as amended, as follows:

(a) Excluding from gross income the amounts received by natural and juridical
persons as indemnity for any loss or injury suffered;

(b) Incorporating a proviso on de minimis benefits into the NIRC of 1997; and

(©) Removing the tax advantage of managerial employees over rank-and-file
employees on fringe benefits.

The role of human capital in developing the economy has been widely acknowledged.
This is one of the reasons that Congress has enacted pro-labor laws such as Republic Act No.
9504 which increased the basic personal exemption and exempted minimum wage earners
from the payment of income tax. While our current tax system provides for some relief to our
workers by reducing their income tax burden, it still needs to be enhanced to address other
issues and concerns besetting the labor sector.

Workers are sometimes compensated in the form of back wages, allowances and
benefits by virtue of a labor dispute award. While it is clearly stated in Revenue

Memorandum Circular No. 39-2012 that such remunerations are taxable, other amounts


received by the worker as part of recoveries for physical and nonphysical i
obtained due to the dispute should not be treated as part of those remunerations. Moreover,
other types of damages awarded by courts should also be explicitly included in the list of
exclusions from gross income since these do not constitute part of the worker’s rendered

juries or damages

service to his employer.

The incorporation of the provision on de minimis benefits lifted from Revenue
Regulations No. 5-2011 secures its continued implementation by institutionalizing it in the
Tax Code. The cei
three years based on their current Consumer Price Index (CPI) values.

1g amounts therein provided, however, are proposed to be adjusted every

‘The proposed removal of the tax advantage of managerial employees over rank-and-
file employees with respect to fringe benefits is a move that would reduce the income divide
between these groups of employees. More than ever, the words of President Ramon
Magsaysay that those who have less in life should have more in law ring true.

We owe it to our labor force to craft laws that ensure they get effectively what are due
them by expanding and strengthening the mechanisms through which they can find relief

from the taxes that take off significant amounts from their meager monthly take home pay.

In view of the foregoing, immediate approval of this

VILMA SANTOS-RECTO


EIGHTEENTH CONGRESS OF THE )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )
HOUSE OF REPRESENTATIVES

H.B.No._4359

Introduced by Rep. Vilma Santos-Recto
6" District of Batangas

AN ACT
PROVIDING TAX RELIEF TO THE LABOR SECTOR BY EXPANDING THE
COVERAGE OF EXCLUSIONS FROM GROSS INCOME AND INCREASING THE
AMOUNTS OF DE MINIMIS BENEFITS EXEMPT FROM TAX AMENDING FOR
THE PURPOSE SECTIONS 32(B) AND 33 OF THE NATIONAL INTERNAL
REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:

Section 1. Section 32(B) of the National Internal Revenue Code of 1997, as amended,
is hereby further amended to read as follows:
“Sec. 32. Gross Income. —
(A) xxx
“(B) Exclusions from Gross Income. — The following items shall not be
included in gross income and shall be exempt from tax under this Title:
(1) xx
(2) xxx
(3) xxx
(4) xxx
“(5) DAMAGES AWARDED BY COURTS, BOARDS OR
OFFICERS EXERCISING JUDICIAL OR QUASI-
JUDICIAL FUNCTIONS. - AMOUNTS RECEIVED AS
INDEMNITY BY NATURAL OR JURIDICAL PERSONS
FOR ANY LOSS OR INJURY SUFFERED, SUCH AS,
BUT NOT LIMITED TO:
(A) DAMAGES RECEIVED BY EMPLOYEES AS
COMPENSATION FOR PHYSICAL AND


NONPHYSICAL INJURIES ACQUIRED DURIN¢
LABOR DISPUTES;

(B) DAMAGES TO PERSONAL OR FAMILY
RIGHTS;

(©) DAMAGES FOR SLANDER AND LIBEL;

(D) AWARD FOR LOSS OF LIFE; AND

(E) DAMAGES FOR INJURIES TO THE GOODWILL
OF A TAXPAYER'S BUSINESS, UNLESS THE
AMOUNT AWARDED EXCEEDS THE VALUE OF
GOODWILL.

“HSHH6) xxx
“HOH (7) xxx
“{H (8) Miscellaneous Items. —
“(a) xxx
“(b) xxx
(0) xxx
“@) xxx
“(€) xxx
“(£) xxx
“(g) xxx
“(h) xxx.
“() DE MINIMIS BENEFITS. - THESE SHALL BE

LIMITED TO FACILITIES OR PRIVILEGES
FURNISHED OR OFFERED BY AN EMPLOYER
TO HIS EMPLOYEES, BOTH MANAGERIAL
AND RANK-AND-FILE, THAT ARE OF
RELATIVELY SMALL VALUE AND ARE
OFFERED OR FURNISHED BY THE
EMPLOYER MERELY AS A MEANS OF
PROMOTING THE HEALTH, GOODWILL,
CONTENTMENT, OR EFFICIENCY OF HIS
EMPLOYEES, SUCH AS, BUT NOT LIMITED
TO, THE FOLLOWING:


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10
i
2
13
14
15
16
7
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32

“() MONETIZED VALUE OF VACATION
AND SICK LEAVE CREDITS PAID TO
PRIVATE EMPLOYEES NOT
EXCEEDING TEN (10) DAYS DURING
THE YEAR;

“() MONETIZED VALUE OF VACATION
AND SICK LEAVE CREDITS PAID TO
GOVERNMENT OFFICIALS AND
EMPLOYEES;

“(I) MEDICAL CASH ALLOWANCE TO
DEPENDENTS OF EMPLOYEES NOT
EXCEEDING ONE THOUSAND FIVE
HUNDRED PESOS (P1,500) PER
SEMESTER OR TWO HUNDRED FIFTY
PESOS (P250) PER MONTH;

“(V) RICE SUBSIDY OF = TWO
THOUSAND PESOS (P2,000) OR ONE (1)
SACK OF 50-KG. RICE PER MONTH
AMOUNTING TO NOT MORE THAN
P2,000;

“(V) UNIFORM AND CLOTHING
ALLOWANCE NOT EXCEEDING SIX
THOUSAND PESOS (P6,000) PER
ANNUM;

“(VD - ACTUAL MEDICAL ASSISTANCE
TO COVER MEDICAL AND HEALTH
CARE NEEDS, ANNUAL MEDICAL/
EXECUTIVE CHECK UP, MATERNITY
ASSISTANCE, AND ROUTINE
CONSULTATIONS, NOT EXCEEDING
TWENTY-FIVE THOUSAND PESOS
(P25,000) PER ANNUM;


“(VIT) LAUNDRY ALLOWANCE NOT
EXCEEDING SIX HUNDRED PESOS
(P600) PER MONTH;

“(VII) EMPLOYEE ACHIEVEMENT
AWARDS FOR LENGTH OF SERVICE
OR SAFETY ACHIEVEMENT, WHICH
MUST BE IN THE FORM OF A
TANGIBLE PERSONAL PROPERTY
OTHER THAN CASH OR GIFT
CERTIFICATE, WITH AN ANNUAL
MONETARY VALUE NOT EXCEEDING
TWENTY THOUSAND PESOS (P20,000)
RECEIVED BY THE EMPLOYEE UNDER
AN ESTABLISHED WRITTEN PLAN
WHICH DOES NOT DISCRIMINATE IN
FAVOR OF HIGHLY PAID EMPLOYEES;

“(X) GIFTS OR PRIZES GIVEN DURING
CHRISTMAS AND MAJOR
ANNIVERSARY CELEBRATIONS NOT
EXCEEDING TEN THOUSAND PESOS
(P10,000) PER EMPLOYEE PER ANNUM;

“(X) DAILY MEAL ALLOWANCE FOR
OVERTIME WORK NOT EXCEEDING
TWENTY-FIVE PERCENT (25%) OF THE
BASIC MINIMUM WAGE.”

PROVIDED, THAT NOT LATER THAN THREE (3)
YEARS AFTER THE EFFECTIVITY OF THIS ACT
AND EVERY THREE (3) YEARS THEREAFTER, THE
AMOUNTS STATED UNDER SUBSECTIONS (II), (IV),
(V), (VD, (VED, (VIE), AND (IX) HEREIN SHALL BE
ADJUSTED TO THEIR PRESENT VALUE USING THE
CONSUMER PRICE INDEX (CPI) AS PUBLISHED BY
THE PHILIPPINE STATISTICS AUTHORITY (PSA)


WITHIN THIRTY (30) DAYS FROM THE
EFFECTIVITY THEREOF.
“() FRINGE BENEFITS TO RANK-AND-FILE
EMPLOYEES - BENEFITS GIVEN TO THE RANK-
AND-FILE EMPLOYEES, WHETHER GRANTED
UNDER A COLLECTIVE —_ BARGAINING
AGREEMENT OR NOT.”
Sec. 2. Section 33 of the National Internal Revenue Code of 1997, as amended, is
hereby further amended to read as follows:
“SEC. 33. Special Treatment of Fringe Benefits. —
(A) xxx
“(B) Fringe Benefit Defined. — For purposes of this Section, the term ‘fringe
benefit’ means any good, service or other benefit furnished or granted in
cash or in kind by the employer to an individual employee {fexeeptrank-
and-file-employees-as-defined-herein}} such as, but not limited to, the
following:

“(1) Housing;

“(2) Expense account;

“(3) Vehicle of any kind;

“(4) Household personnel, such as maid, driver and others;

“(5) Interest on loan at less than market rate to the extent of the
difference between the market rate and actual rate granted;

“(6) Membership fees, dues and other expenses borne by the
employer for the employee in social and athletic clubs or other
similar organizations;

“(7) Expenses for foreign travel;

(8) Holiday and vacation expenses;

“(9) Educational assistance to the employee or his dependents; and

(10) Life or health insurance and other non-life insurance premiums
or similar amounts in excess of what the law allows.

“(C) Fringe Benefits Not Taxable. — The following fringe benefits are not
taxable under this Section:

“(1) Fringe benefits which are authorized and exempted from tax
under special laws;


(2) Contributions of the employer for the benefit of the employee to
retirement, insurance and hospitalization benefit plans;
“(3) Benefits given to the rank-and-file employees, whether granted
under a collective bargaining agreement or not; and
“(4) De minimis benefits as defined in fthe-rules-and-regulations-e-be
“ ee :
of the Commissioner} SECTION 32 (B)(8)(I) HEREOF.
“The Secretary of Finance is hereby authorized to promulgate, upon
recommendation of the Commissioner, such rules and regulations as are
necessary to carry out efficiently and fairly the provisions of this Section,
taking into account the peculiar nature and special need of the trade, business
or profession of the employer.”

Sec. 3. Implementing Rules and Regulations (IRR). — Within sixty (60) days upon
approval of this Act, the Secretary of Finance shall issue the IRR for the effective
implementation of this Act.

Sec. 4. Separability Clause. — If any provision of this Act is declared unconstitutional
or invalid, other parts or provisions hereof not affected thereby shall continue to be in full
force and effect.

Sec. 5. Repealing Clause. — All laws, orders, issuances, circulars, rules and
regulations or parts thereof, which are inconsistent with the provisions of this Act are hereby
repealed or modified accordingly.

Sec. 6. Effectivity. - This Act shall take effect fifteen (15) days after its publication in
the Official Gazette or in at least two (2) newspapers of general circulation.

Approved,