The Department of Finance (DOF) and the Bureau of Internal Revenue (BIR) are pushing to raise the ceiling on tax-exempt benefits for both private and public sector workers to ease the financial burden on Filipinos by allowing them to take home more of their income.
The proposal aligns with the administration’s goal of inclusive growth, better labor conditions, and enhanced social protection.
The initiative, announced by Finance Secretary Ralph Recto, proposes to increase non-taxable allowances and benefits to account for inflation and rising living costs.
“We always aim to ease the burden of taxpayers. With this proposal, we want the people to truly feel the relief because they will be able to take home more income and it will help them reduce their daily expenses,” Recto said.
He said the increases are expected to have a “minimal impact on the government revenues but will definitely make a significant difference for our workers.”
The proposed adjustments include increasing the tax-exempt limit for monetized unused vacation leave credits for private employees from ten to 12 days, hiking the rice subsidy from P2,000 to P2,500 per month or its market equivalent; adjusting the limit for medical cash allowances for dependents from P1,500 to P2,000 per semester; and increasing the non-taxable threshold for uniform and clothing allowance from P7,000 to P8,000 per year.
They also include raising the ceiling for actual medical assistance from P10,000 to P12,000 per year; increasing the laundry allowance from P300 to P400 per month; adjusting the limit for employee achievement awards from P10,000 to P12,000 per year; raising the ceiling for Christmas or anniversary gifts from P5,000 to P6,000 per year; hiking the tax-free limit for meal allowance for overtime or night-shift work from twenty-five percent to 30 percent of the minimum wage; and adjusting the combined ceiling for collective bargaining agreement (CBA) and productivity incentives from P10,000 to P12,000 per year.
The uncapped benefit for government employees’ monetized vacation and sick leave will be retained.
Recto said that in addition to these benefit adjustments, he has instructed the BIR to explore potential exemptions for certain taxpayer segments from the obligation to withhold and remit creditable withholding taxes.
The DOF and the BIR are also studying ways to simplify and lower applicable withholding tax rates to reduce compliance costs for taxpayers.
