13th Month Pay Retains Tax Exemption in the New Revised Tax Reform Package

Fortunately for the workers, their 13th month pay and other bonuses have retained its tax exemption in the recently revised tax reform package presented by the Department of Finance (DOF) at the Senate ways and means committee.

According to the committee chairman, Senator Sonny Angara, they have once again received good news. He was pleased to announce that the workers’ 13th month pay and other bonuses have still retained its tax exemption in the DOF’s new revised tax reform package. He noted that this only signifies that the government is listening to the workers’ call and sentiments and that it is open to compromise.

It can be recalled that the DOF previously agreed to preserve the Value Added Tax (VAT) exemption of senior citizens and persons with disability (PWD).

In his own statement, which we quoted, Senator Angara said:

“We seek to build on this as we work hand-in-hand in coming up with the much-needed tax reform that will extend the most relief to our people, while balancing it with the government’s ambitious vision of jumpstarting our country’s economic growth,”

Under the Republic Act 10653, both the government and private workers’ 13th month pay and other bonuses, which include productivity incentives and Christmas Bonuses, not surpassing P82,000.00 shall be exempted from tax.

Prior to the execution of RA 10653 in February, 2015, only bonuses not exceeding P30,000.00 were the only exempted from tax.

Later on, the government increased the tax exemption cap of bonuses so that workers can get a bigger take home pay for their family.

Initially, the DOF seek to eliminate this tax exemption of bonuses, while exempting those who are earning P250,000.00 and below a year from income tax.

The said amount of tax-exempt earning was supposed to cover the P82,000.00 13th month pay exemption, the P50,000.00 exemption and the P25,000.00 deduction for each tax payer’s dependent with an maximum of four dependents.

But now, under the revised proposal, workers earning up to P332,000.00 or P250,000.00 income added with P82,000.00 13th month pay and other bonuses will be tax exempted.

As expected, approximately 4.7 million or at least 83 percent of tax payers will be exempted from income tax once the proposed tax reform proposal has been enacted.

Aizelle Joe