EIGHTEENTH CONGRESS OF THE 
)
REPUBLIC OF THE PHILIPPINES 
)
First Regular Session 
)
S E N A T E
s. No. 
601
y/®K(tr oftbtikrtretnrp
•19 
JUL17 
P 6 :13
RECtl\‘uL Li;
Introduced by Senator Ralph G. Recto
AN ACT
EXCLUDING OVERTIME PAY 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
Man does not work like a machine. He cannot work indefinitely. He needs 
ample time to rest and revitalize in order to prepare for another day's work, while 
making sure that he performs to the best of his abilities at all times.
This is why labor laws in many countries prescribe a maximum number of 
work hours. The Philippine Labor Code prescribed the normal hours of work for 
employees at eight (8) hours a day for six (6) consecutive days. If the employee 
works beyond eight (8) hours, the employer is required to pay additional 
compensation equivalent to the employee's regular wage plus at least twenty-five 
percent (25%) of his regular wage. If the employee renders overtime on a holiday or 
rest day, the rate is increased to thirty percent (30% )1.
Employees in the government are also entitled to overtime pay but they are 
governed by Civil Service laws, rules and regulations.
Labor Code of the Philippines.


An employee who renders overtime work puts in additional hours of work and 
requires greater physical and mental effort. Instead of being able to rest early and 
spend more time with the family, the employee is forced to extend the working 
hours to achieve the organization's goals. Thus, it is only fitting that the employee 
be properly compensated for additional work hours rendered.
Unfortunately, compensation received for overtime work forms part of an 
employee's taxable income. This not only limits the full enjoyment of monetary 
benefits due the employee for putting in more hours of work but also diminishes the 
value of the additional physical and mental effort exerted.
In order to give due recognition and compensation to the hours worked in 
excess of the prescribed working hours, this bill seeks to exclude overtime pay from 
the computation of taxable income amending for the purpose Section 32 (B) (7) of 
the National Internal Revenue Code of 1997, as amended.
This proposal will cost the government foregone revenues. However, more 
money in taxpayers' pockets will increase disposable income and boost consumer 
spending which in turn would trigger demand for more goods and services, thereby 
stimulate activities in the industrial and service sectors and eventually generate more 
taxes.
The proposed legislation is expected to benefit an estimated 26.7 million 
wage and salary workers from the private and public sector2.
Hence, immediate passage of this bill is earnestly sought.
/jiao
LPH G
! April 2019 Labor Force Survey.


EIGHTEENTH CONGRESS OF THE 
)
REPUBLIC OF THE PHILIPPINES 
)
First Regular Session 
)
S. No.
S E N A T E
601
cf tbr frfctflniT
T9 JUL 17 P 6 T 3
RECLiv : u’ . ____■—
Introduced by Senator Ralph G. Recto
AN ACT
EXCLUDING OVERTIME PAY FROM THE COMPUTATION OF TAXABLE 
INCOME AMENDING FOR THIS 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:
Section 1. 
Section 32 (B) (7) of the National Internal Revenue Code of 
1997, as amended, is hereby further amended to read as follows:
3
"Sec. 32. 
Gross Income. -
4
"(A) 
General Definition. -  x
5
"(B) 
Exclusions from Gross
6
"(1) XXX
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"(2) XXX
8
"(3) XXX
9
"(4) XXX
10
"(5) XXX
11
"(6) XXX
12
"(7) 
Miscellaneous items. -
13
"(a) XXX
14
"(b) XXX
15
"(c) XXX
16
"(d) XXX


2
3
4
5
6
7
8 
9
10
11
12
13
14
15
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1
"(e) XXX
"(F) OVERTIME PAY -  COMPENSATION DUE TO HOURS
WORKED IN EXCESS OF THE REQUIRED NORMAL WORKING
HOURS.
" t ( m ( G ) x x x
" [(§)] (H) X X X 
"  [m  ( I )  X X X ."
Sec. 2. 
Implementing Rules and Regulations. -  Within thirty (30) days from 
the effectivity of this Act, the Secretary of Finance, upon the recommendation of the 
Commissioner of Internal Revenue, shall promulgate the necessary implementing 
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,