Aquino signs law raising tax exemption cap for bonuses

Natashya Gutierrez
Aquino signs law raising tax exemption cap for bonuses
(UPDATED) The new law raises the tax exemption ceiling on 13th month pay, Christmas bonuses, and other workers' benefits to P82,000

MANILA, Philippines (UPDATED) – Public and private employees who get as much as P82,000 in 13th month pay and other workers’ benefits can now enjoy their year-end bonuses in full.

On Thursday, February 12, Malacañang announced that President Benigno Aquino III signed a law raising to P82,000 ($1,819) from P30,000 ($665) the tax exemption cap on 13th month pay and other workers’ benefits.

“According to the Office of the Executive Secretary, the President has signed into law the bill raising the ceiling on tax exemptions on bonuses to P82,000. The signed law will be transmitted to Congress shortly,” Communications Secretary Herminio Coloma Jr said in a statement.

Senator Juan Edgardo Angara, Senate co-author and sponsor of the measure, described the signing of the law as a “long overdue tax relief” for hard-working Filipinos.

“Belated Christmas present man, perfect Valentines gift pa rin para sa ating mga kababayan (for our countrymen),” said Angara, chair of the Senate ways and means committee.

Senate President Pro Tempore Ralph Recto, principal author of the measure, also thanked the President for signing the law, which he said would “provide economic relief to workers both private and public, whose purchasing power has been substantially eroded due to inflation.”

“The measure will increase the disposable income of workers which will not only allow them to celebrate a merrier Christmas but also pay for tuition, medical attention and other basic necessities. This supports a stronger, hardworking and productive middle class who are the country’s engine of growth,” Recto said.           

The new law provides for the automatic adjustment of the ceiling every 3 years, taking into account inflation, to ensure that the tax ceiling won’t be left unchanged again for more than two decades.

It amends Republic Act 7833 that set a P30,000-tax exemption cap on Christmas bonuses, 13th month pay, and other workers’ benefits, starting 1994.

Internal Revenue Commissioner Kim Henares earlier expressed reservations about the law, arguing that the additional tax exemption would hurt the economy if no additional taxes are imposed to compensate it.

Supporters of the bill however, said that raising tax exemption caps would increase the purchasing power of employees and help boost the economy.

Lawmakers earlier eyed the measure as a “Christmas gift” to the people in 2014, but the Department of Finance requested them to defer the passage of the law to 2015, so that it would not affect 2014 revenue collections.

The DOF had projected P30 billion ($676 million) in foregone annual revenues over the measure, but others have pegged the loss at only P3 billion ($67.6 million). –

*US$1 = P45

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