New bonus rule takes effect this year, says BIR

The higher tax-exemption cap on bonuses will already be enjoyed by workers this year, as the Bureau of Internal Revenue (BIR) said the law signed by President Aquino last month would apply to extra pay received starting Jan. 1.

Revenue Regulations (RR) No. 3-2015 issued by BIR Commissioner Kim S. Jacinto-Henares and Finance Secretary Cesar V. Purisima on Mar. 9 implement Republic Act (RA) No. 10653, which brought up to P82,000 from P30,000 previously the total amount of tax-exempt bonuses.

RR 3-2015 clarified that the amount of P82,000 “shall only apply to the 13th-month pay and other benefits prescribed under the provisions of Section 2.78.1.(B)(11) of RR 2-98, as amended,” which also covers workers’ Christmas bonuses, productivity incentive bonuses, loyalty awards, as well as gifts in cash or in kind.

In that regard, the BIR pointed out that the total amount of bonuses to be subjected under the P82,000 ceiling does not include “other compensation received by an employee under an employer-employee relationship, such as basic salary and other allowances.”

Also, the BIR said “this exclusion from gross income is not applicable to self-employed individuals and income generated from business.”

According to the BIR, the higher tax-exemption ceiling “shall apply to the 13th-month pay and other benefits paid or accrued beginning Jan. 1, 2015.”

Hence, government workers, for instance, who would receive half of their bonuses by the middle of this year, will already enjoy this tax perk.

The BIR warned that violators of this new rule would be slapped penalties under the National Internal Revenue Code of 1997.

Henares earlier brought down the BIR’s tax collection goal for this year to P1.674 trillion, as RA 10653 was seen to bring about revenue leaks to the tune of P26 billion to P30 billion

The BIR has twice lowered its original collection target this year of P1.721 trillion in taxes.

Last January, Henares cut this year’s goal to P1.704 trillion, citing the P16.9 billion in foregone revenues from the expanded exemption on workers’ de minimis benefits gained from collective bargaining agreement (CBA) as well as productivity bonuses, as ordered by the Department of Labor and Employment last year.

Under RR 1-2015 issued by Henares in January, exempted from withholding taxes were “benefits received by an employee by virtue of a CBA and productivity incentive schemes provided that the total annual monetary value received from both CBA and productivity incentive schemes do not exceed P10,000 per employee per taxable year.”

Also, such cash benefits coming from CBAs as well as productivity incentives will no longer be subject to fringe benefit tax as long as the amount does not exceed P10,000 per worker per year.