Frontliners: You care, we spare!

It has been more or less than a year since COVID-19 reared its ugly head to the world. First documented in Wuhan, Hubei Province in China in December 2019, experts believe that COVID-19 likely originated from bats which can infect both animals and humans.

COVID-19 can be transmitted easily through talking, coughing, or sneezing. Droplets containing the virus can also land on surfaces or objects which people come into contact with in their day-to-day activities. Hence, a person can easily catch the virus by merely touching one’s nose, eyes, or mouth.

As a result, the virus spread like wildfire. Over the course of time, increasing cases all over the world outside Wuhan were reported – including the Philippines, which recorded its first confirmed COVID-19 case in the latter part of January 2020 when a tourist tested positive with the virus. In less than two months, the first local transmission of COVID-19 was confirmed in the country in March 2020, which was around the same time that the World Health Organization declared the COVID-19 outbreak a global pandemic.

Acting swiftly to reduce the risk of transmission, the Philippine government through its chief executive, President Duterte, placed the entire Philippines under a state of public health emergency by virtue of Proclamation No. 922, as the number of confirmed COVID-19 cases in the country increased.

On March 16, 2020, President Duterte issued Proclamation No. 929 declaring a State of Calamity throughout the Philippines and placing the whole of Luzon under Enhanced Community Quarantine (ECQ) until April 12, 2020, subject to several restrictions, including but not limited to strict home quarantine, strict “social distancing” measures, and strict mandate for most private establishments to temporarily cease operations during the duration of the quarantine. The ECQ imposed was eventually downgraded to a Modified Enhanced Community Quarantine (MECQ), which allowed certain industries to resume operations, albeit only at 50 percent capacity. As the rate of transmission began to decrease, MECQ was further downgraded to General Community Quarantine (GCQ) or Modified GCQ (MGCQ).

During the course of the pandemic, our medical healthcare workers and frontliners have been tirelessly working to combat the disease and stop the virus from spreading. Rightfully so, they have expressed how strenuous it has been these past several months of battling COVID-19, especially with limited resources. Moreover, it is heart-wrenching to know that there have also been health workers, which includes neophytes and leaders in the field, who have fallen in the line of duty and succumbed to the virus.

To help alleviate the woes of our medical healthcare workers and frontliners, Rep. Luisa Lloren Cuaresma filed House Bill No. 7351 entitled, “Handog sa mga Bayaning Lumalaban Kontra COVID-19 Act” on Aug. 11, 2020. The House bill aims to reward the efforts and hard work of our modern heroes. The House bill seeks to provide tax exemption to all medical and non-medical frontliners who are directly serving, treating, caring, aiding, and assisting COVID-19 patients for the taxable year 2020.

The bill proposes to exempt medical frontliners from the payment of income tax for a period of one year. Income tax as defined in Section 2(a) of the bill refers to the amount of salary and/or compensation being received by medical frontliners who are working or employed in a medical institution. The exemption covers persons who are: (1) engaged in health-related services, and, (2) working or employed in hospitals, clinics or other medical institutions whether public or private, which accept or treat patients infected with COVID-19. The exemption likewise includes administrative employees, support personnel and staff of health institution, regardless of their employment status.

Further, under Section 4 of the said bill, the exemption to be granted only covers the salary or compensation, as well as the gross receipts from the exercise of profession or employment received by a frontliner for the taxable year 2020. The tax holiday provided in the bill shall not include income received by the frontliners from their other businesses, investments, and other kinds of passive income not related to serving, treating, caring, aiding, and assisting COVID- 19 patients.

To date, there are already more than 450,000 confirmed COVID-19 cases and more than 8,700 deaths reported in the country due to the dreadful coronavirus. While vaccines have already been developed, our medical healthcare workers remain to be the key players in the ongoing fight against COVID-19. In this respect, the proposed exemption from income tax may be considered as the government’s way of showing gratitude to our medical health workers who have been working tirelessly and risking life and limb to vigorously care for the afflicted.

As of this writing, the bill is under the committee on ways and means and is still on its first reading in the House of Representatives.

Ma. Francesca Alexis P. Mañalac is a supervisor from the tax group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International. KPMG RGM&Co. has been recognized as a Tier 1 tax practice and Tier 1 transfer pricing practice by the International Tax Review.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or KPMG RGM&Co. For comments or inquiries, please email [email protected] or [email protected].