House, Senate raise tax exemption cap on bonuses
Members of the bicameral conference committee on the Tax Reform for Acceleration and Inclusion (TRAIN) bill have agreed to increase the tax exemption cap of 13th month pay and other bonuses to P90,000, said Senator Juan Edgardo Angara.
“Now that it’s Christmas, we have agreed in the bicam to increase again the amount of 13th month pay and other bonuses without deducting taxes,” Angara, chairman of the Senate ways and means committee, said.
Under the current law, the 13th month pay and other benefits, including productivity incentives and Christmas bonuses, are exempted from tax if they do not exceed P82,000.
The Senate version of the TRAIN retained the P82,000 tax-free cap while the approved version of the House of Representatives raised it to P100,000.
As compromise, members of the bicam, who are tasked to reconcile the differences between the two versions, have agreed to raise the tax-exempt ceiling to P90,000 effective starting 2018.
Bicam members have also agreed to exempt P250,000 annual taxable income of all individual income taxpayers.
Angara said this would mean workers could bring home P340,000 to their families without having any taxes deducted.
The original proposal from the Department of Finance sought to scrap the 13th month pay tax exemption and to make it part of the all-inclusive P250,000 income tax exemption.
Under the law, the 13th month pay should be given to private sector employees not later than Dec. 24. It must be equivalent to one-twelfth of the basic salary of an employee within a calendar year.
The senator reminded employers that they must pay their rank-and-file employees a 13th month pay regardless of the nature of their employment and whatever the method their wages are paid, provided they worked for at least one month during a calendar year.