STARTING next month, millions of workers will enjoy bigger tax exemption after President Benigno Aquino 3rd ordered the Labor and Finance departments to expand the list of benefits that will not be taxed to include those under collective bargaining agreements (CBAs) and productivity incentives.
In an interview over state-run Radyo ng Bayan on Sunday, Presidential Communications Secretary Herminio Coloma Jr. said the President has approved the new rules on tax exemptions proposed by Labor Secretary Rosalinda Baldoz and Finance Secretary Cesar Purisima.
“An additional P10,000 will be included in tax exemptions on benefits received by Filipino workers,” he added.
From the previous P94,225 covered, it is estimated that the total benefits that will be tax-exempt will rise to P104,225.
“On the other hand, some P17 billion will no longer be collected by the BIR [Bureau of Internal Revenue],” Coloma explained.
According to the Palace official, the decision to increase the list of tax-exempt benefits was arrived at after a series of dialogues between Aquino and various labor organizations this year.
“The new rule will be implemented in January 2015 through a revenue regulation [RR] that will be issued by the [BIR]. According to Secretary Purisima, the additional tax exemption on so-called de minimis benefits is just because millions of workers will benefit from this,” Coloma explained,
“They belong to those who have the lowest income levels in the labor sector,” he said.
De minimis benefits are those benefits of relatively small values given by employers to their employees on top of the compensation. The BIR sets a limit on the value of tax-exempt de minimis benefits.
Under the old RR 8-00, as amended by RR 10-00, the BIR considers the following as de minimis benefits: 10 days monetized unused vacation leave credits; medical cash allowance to dependents of employees not exceeding P750 per semester or P125 per month; rice subsidy of P1,000 or one-sack of rice per month; uniforms and clothing allowance not exceeding P3,000 per year; medical benefits not exceeding P10,000; laundry allowance of P300 per month; employee achievement awards in the form of tangible personal property other than cash or gift certificate, with an annual monetary value not exceeding P10,000 received by the employee under an established written plan; flowers, fruits, books or similar items given to employees under special circumstances, e.g. on account of illness, marriage, birth of a baby, etc.; and daily meal allowance for overtime work not exceeding 25 percent of the basic minimum wage.
Earlier, the Labor chief described the newly-approved tax exemption as a “fitting gift to our workers in this holiday season.”
“With this, millions of Filipino workers could welcome the new year with a more realistic hope of sharing in the country’s growing prosperity. That is what inclusive growth is,” Baldoz said.
The BIR revenue regulation on de minimis benefits was last amended in 2012.
Baldoz recalled that expanding the list of tax-exempt de minimis benefits was one of the demands of labor at the dialogue with the President in the last Labor Day commemoration in May 2014.
Purisima said P16.9 billion in revenues will be lost once the new BIR revenue regulation takes effect.