Workers’ CBA, productivity bonuses exempted from tax under certain terms

By: Ben O. de Vera - 10 years ago

Internal Revenue Commissioner Kim Henares. INQUIRER FILE PHOTO

MANILA, Philippines—The government has issued the rules under which workers’ so-called de minimis benefits gained from a collective bargaining agreement (CBA) with employers as well as productivity bonuses shall now enjoy tax exemption.

Under Revenue Regulations (RR) No. 1-2015 issued by Bureau of Internal Revenue (BIR) Commissioner Kim S. Jacinto-Henares on Jan. 5, now exempt from withholding taxes are “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 is not higher than P10,000 per worker per year.

This first RR issued by the BIR in 2015 further amends RRs 2-98 and 3-98, as amended by RRs 5-2008, 5-2011 and 8-2012.

The latest amendment under RR 8-2012 exempted clothing and uniform allowances not exceeding P5,000 a year from income tax as well as fringe benefit tax.

Last December, the Department of Labor and Employment (Dole) announced this tax exemption scheme as a “fitting gift” to workers during the holiday season.

According to Labor Secretary Rosalinda Dimapilis-Baldoz, this scheme will allow every worker-taxpayer to take home up to P104,225 in de minimis benefits each year.

While the government stands to lose about P16.9 billion in revenues from this measure, the Department of Finance has said this was nonetheless a “balanced proposal that augment the strength of our economy.”

“We believe that the expansion of tax-exempt de minimis benefits is fairer and more equitable than other measures of tax relief benefiting only a small percentage of the working population. This measure directly impacts the working poor and the smallest income earners, who stand to have the most to gain from these benefits. We came to this agreement after a thorough consideration: we think this is a win for all Filipinos,” Finance Secretary Cesar V. Purisima had been quoted by Dole as saying.