* RECEIVED 7
pare _18 AUG 2075

Republic of the Philippines
HOUSE OF REPRESENTATIVES
Batasan Hills, Quezon City

‘TWENTIETH CONGRESS
First Regular Session

HOUSE BILL NO. 3782

Introduced by 4Ps Partylist Representative
JC M. ABALOS

EXPLANATORY NOTE

Section 9, Article II of the 1987 Constitution provides 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.”

Pursuant to this constitutional directive, it is imperative that the State
continuously reviews and updates its tax laws to ensure that they remain fair,
equitable, and responsive to economic realities — particularly those affecting Filipino
workers.

Despite stable employment, modest savings, and a measure of financial
security, middle-income households are often unprepared for the overwhelming cost
of treating a critical illness. Medical expenses extend well beyond hospitalization,
encompassing diagnostics, long-term medications, specialized therapies, and
rehabilitative care. While public health insurance offers some relief, it typically
covers only a fraction of these costs, leaving families to shoulder the rest through
out-of-pocket payments, borrowing, or even liquidating assets.

Under the National Internal Revenue Code (NIRC), as amended, allowable
deductions for purposes of computing taxable income generally include expenses,
interest, taxes, losses, and other costs incurred in the ordinary course of trade,


business, or the practice of a profession. However, personal and living expenses,
including premiums paid for life or critical illness insurance which are intended to
safeguard individuals against extraordinary events such as serious illness, are not
recognized as deductible items in determining an individual's taxable income.

The intent of this legislation is to provide immediate and targeted tax relief
that can soften the financial impact of such medical events. Unlike ordinary health
expenses, critical illness-related costs are often urgent, unpredictable, and financially
destabilizing, with long-term effects on a household's income, productivity, and
overall well-being.

By expressly allowing the deduction of critical illness-related expenses from
gross income, this bill affirms a key principle: that tax policy should not only serve
the purpose of revenue generation but also act as a tool for social
protection— particularly in moments of extreme vulnerability. It reinforces the notion
that taxpayers should not be taxed on income that has effectively been exhausted by
necessary and extraordinary medical expenditures.

Moreover, this bill aligns with the goals of the Universal Health Care (UHC)
Act by reinforcing financial protection mechanisms for families. While structural
reforms to the health care system continue, the tax system must evolve in parallel to
address the immediate and real costs borne by Filipino families.

In acknowledging the lived realities of those navigating serious health
conditions, this bill offers a concrete and compassionate response: to recognize,
through tax relief, the extraordinary burdens borne by taxpayers who are striving to
survive—not just physically, but financially.

Representative
4Ps Partylist


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Batasan Hills, Quezon City

‘TWENTIETH CONGRESS.
First Regular Session

HOUSE BILL No._3782 _

Introduced by 4Ps Partylist Representative
JC M. ABALOS

AN ACT
ALLOWING THE DEDUCTION OF QUALIFIED MEDICAL EXPENSES
INCURRED FOR CRITICAL ILLNESS FROM GROSS INCOME, AMENDING
SECTIONS 22, 32 AND 34 OF REPUBLIC ACT NO. 8424, OTHERWISE KNOWN
AS THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED

SEC. 1. Declaration of Policy. ~ The State upholds a just and dynamic social
order that promotes national prosperity and independence, and seeks to free the
people from poverty through equitable economic and fiscal measures. Pursuant to
Section 9, Article II of the 1987 Constitution, the State recognizes the importance of
ensuring fairness in the tax system and of upholding the principles of equity and
social justice, particularly in the treatment of income earned by Fil
families.

In this light, it is the policy of the State to strengthen social protection through
tax measures that respond to the real and pressing challenges faced by households
during periods of extraordinary hardship. Recognizing the severe and often
unpredictable financial burden caused by critical illnesses, the State shall provide
targeted tax relief to affected individuals and families by allowing the deduction of
qualified medical expenses from taxable income.

In alignment with Republic Act No. 11223, otherwise known as the “Universal
Health Care Act,” the State recognizes that all Filipinos are guaranteed access to
promotive, preventive, curative, rehabilitative, and palliative care through publicly


financed health services, including PhilHealth benefit packages. However,
recognizing that critical illnesses often involve costs that exceed the scope or
timeliness of public support, this Act seeks to provide secondary financial protection
by allowing the deduction of residual, out-of-pocket medical expenses for certified
critical illnesses from gross income. This measure aims to close the gap between the
actual cost of care and available coverage, without diminishing the primary role of
public health financing in ensuring universal health access.

SEC. 2. Section 22 of the NIRC, as amended, is hereby further amended to
read as follows:

“SEC. 22. Definitions. - XXX

(MM) CRITICAL ILLNESS. - REFERS TO A SERIOUS HEALTH
CONDITION AS DEFINED AND CERTIFIED BY THE DEPARTMENT
OF HEALTH (DOH), INCLUDING BUT NOT LIMITED TO CANCER,
STROKE, HEART ATTACK AND CEREBROVASCULAR DISEASES.

(NN) QUALIFIED MEDICAL EXPENSES - REFERS TO THE PORTION
OF MEDICAL AND HOSPITAL EXPENSES RELATED TO THE
DIAGNOSIS, TREATMENT, OR MANAGEMENT OF A CERTIFIED
CRITICAL ILLNESS THAT IS ACTUALLY PAID OUT-OF-POCKET BY
THE TAXPAYER, AFTER DEDUCTING ANY AMOUNTS COVERED
OR REIMBURSED BY PHILIPPINE HEALTH INSURANCE
CORPORATION (PHILHEALTH), PRIVATE HEALTH INSURANCE,
EMPLOYER-SPONSORED HEALTH PLANS, OR ANY FINANCIAL
ASSISTANCE, SUBSIDY, OR GRANT PROVIDED BY THE
FOLLOWING GOVERNMENT AGENCIES:

1. DEPARTMENT OF HEALTH (DOH)

2. DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT

(DSWD)

3. PHILIPPINE CHARITY SWEEPSTAKES OFFICE (PCSO)
. OFFICE OF THE VICE PRESIDENT (OVP)
5. OFFICE OF THE PRESIDENT (OP)

i

XXX.”

SEC. 3. Section 32 of the NIRC, as amended, is hereby further amended to
read as follows:

“SEC. 32. Gross Income. - XXX
(B) Exclusions from Gross Income. - XXX


(4) Compensation for Injuries or Sickness. - amounts received, through
Accident or Health Insurance or under Workmen's Compensation Acts,
as compensation for personal injuries or sickness, plus the amounts of
any damages received, whether by suit or agreement, on account of
such injuries or sickness. PROVIDED, THAT NO DEDUCTION
UNDER SECTION 34 (M) SHALL BE ALLOWED FOR ANY EXPENSE
CORRESPONDING TO THE AMOUNTS EXCLUDED FROM GROSS
INCOME UNDER THIS SUBSECTION.

XXX.”

SEC. 4. Section 34 of the NIRC, as amended, is hereby further amended to
read as follows:

“SEC. 34. Deductions from Gross Income. - XXX

(M) QUALIFIED MEDICAL EXPENSES. -
(1) IN GENERAL - MEDICAL AND HOSPITAL EXPENSES
PAID OR INCURRED WITHIN THE TAXABLE YEAR FOR
THE DIAGNOSIS, TREATMENT, OR MANAGEMENT OF A
CERTIFIED CRITICAL ILLNESS SHALL BE ALLOWED AS
DEDUCTION FROM GROSS INCOME:

(a) THE DEDUCTION SHALL APPLY ONLY TO
OUT-OF-POCKET MEDICAL EXPENSES ACTUALLY
PAID BY THE TAXPAYER WITHIN THE TAXABLE
YEAR, AND NOT REIMBURSED OR OTHERWISE
COMPENSATED THROUGH INSURANCE PROCEEDS
OR AMOUNTS EXCLUDED FROM GROSS INCOME
UNDER SECTION 32(B)(4);

(b) THE ILLNESS MUST BE CERTIFIED AS A CRITICAL
ILLNESS BY THE DEPARTMENT OF HEALTH (DOH)
OR AN ACCREDITED MEDICAL BOARD, IN
ACCORDANCE WITH GUIDELINES TO BE JOINTLY
ISSUED BY THE DOH AND THE BIR.

PROVIDED, ‘QUALIFIED MEDICAL EXPENSES’
SHALL INCLUDE COSTS RELATED TO HOSPITALIZATION,
SURGERIES, THERAPIES, PRESCRIBED MEDICATIONS,
DIAGNOSTIC PROCEDURES, MEDICAL EQUIPMENT, AND


OTHER MEDICALLY NECESSARY EXPENSES ASSOCIATED
WITH A CERTIFIED CRITICAL ILLNESS, AS MAY BE
FURTHER DEFINED BY IMPLEMENTING RULES AND
REGULATIONS.

PROVIDED, FURTHER, THAT IN DETERMINING THE
DEFINITION OF ‘CRITICAL ILLNESS’ AND THE SCOPE OF
‘QUALIFIED MEDICAL EXPENSES, THE DOH SHALL BE
GUIDED BY THE RECOMMENDATIONS AND FINDINGS OF
THE HEALTH TECHNOLOGY ASSESSMENT (HTA) PROCESS
INSTITUTIONALIZED UNDER SECTION 34 OF UNIVERSAL
HEALTH CARE ACT, AND ITS IMPLEMENTING RULES AND
REGULATIONS. ONLY THOSE DRUGS, PROCEDURES,
SERVICES, AND MEDICAL DEVICES POSITIVELY
RECOMMENDED BY THE HTA SHALL BE ELIGIBLE FOR
DEDUCTION UNDER THIS SUBSECTION.

(2) SUBSTANTIATION REQUIREMENTS - THE EXPENSES
MUST BE SUPPORTED BY OFFICIAL RECEIPTS, MEDICAL
CERTIFICATES, AND SUCH DOCUMENTATION AS MAY BE
PRESCRIBED BY THE BUREAU OF INTERNAL REVENUE
(BIR) THROUGH APPROPRIATE REGULATIONS.

(3) LIMITATION ON DEDUCTIONS - THE AMOUNT
DEDUCTIBLE SHALL BE LIMITED TO THE PORTION OF
TOTAL QUALIFIED MEDICAL EXPENSES THAT EXCEEDS
THE APPLICABLE THRESHOLD, BASED ON THE
TAXPAYER'S GROSS INCOME, AS FOLLOWS:
(a) FOR TAXABLE INCOME OVER P250,000 BUT NOT
EXCEEDING P800,000 - 10% OF GROSS INCOME;
(b) OVER ?800,000 BUT NOT EXCEEDING P2,000,000 -
7.5% OF GROSS INCOME;
(c) OVER P2,000,000 BUT NOT EXCEEDING P8,000,000 ~
5% OF GROSS INCOME;
(d) OVER P8,000,000 - 3% OF GROSS INCOME.

PROVIDED, THAT THE TOTAL AMOUNT CLAIMED AS
DEDUCTION UNDER THIS SUBSECTION SHALL NOT
EXCEED FIFTY PERCENT (50%) OF THE TAXPAYER'S GROSS
INCOME, OR SUCH REASONABLE CAP AS MAY BE SET BY
THE BIR.


PROVIDED FURTHER, THE SECRETARY OF FINANCE, IN
CONSULTATION WITH THE DEPARTMENT OF HEALTH
AND THE PHILIPPINE STATISTICS AUTHORITY, MAY
REVIEW AND ADJUST THE THRESHOLD PERCENTAGES
OR ALLOWABLE EXPENSE CAP EVERY THREE (3) YEARS,
TAKING INTO CONSIDERATION INFLATION, WAGE
LEVELS, AND OTHER RELEVANT INDICATORS.

XXX.”

SEC. 5. Implementing Rules and Regulations. - The Department of Finance,
in consultation with the Department of Health and Bureau of Internal Revenue, shall
issue rules and regulations for the faithful and effective implementation of this Act.

SEC. 6. Separability Clause. - If any part or provision of this Act is held
invalid or unconstitutional, the other provisions not affected thereby shall remain in
force and effect.

SEC. 7. Repealing Clause. - All laws, executive orders, issuances, decrees,
rules and regulations inconsistent with or contrary to the provisions of this Act are
deemed amended, modified or repealed accordingly.

SEC. 8. Effectivity. - This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in a newspaper of general circulation.

Approved,