BIR releases regulations on higher tax-free bonus

CEBU, Philippines – After President Noynoy Aquino signed last month the law raising the tax exclusion on year-end bonuses, the Bureau of Internal Revenue has released the implementing rules of the law, signaling its effectivity. 

The law which exempts the 13th month pay and other benefits amounting of up to P82,000 from gross income covers both private and public employees.

But the BIR cleared the law does not cover the workers' compensations such as basic salary and other allowances.

“Further, it must be emphasized that this exclusion from gross income is not applicable to self-employed individuals and income generated from bonuses,” stated Revenue Regulations 3-2015 recently released by BIR.

The issuance further said: “The amount of P82,000 shall apply to the 13th month pay and other benefits paid or accrued beginning January 1, 2015.”

The revenue agency advised employers to ensure the correct computation and application of the increase on the year-end bonuses of their employees.

The BIR already warned the law adjusting the exemption ceiling of bonuses from P30,000 to P82,000 would result to tax losses reaching up to P30 billion, pushing it to downgrade its overall 2015 revenue target and that of its collecting units.

Latest data from BIR showed the bureau now targets P1.674 trillion in revenues in 2015, down from P1.704 previously set.

The tax agency has kept the targets for the different types of taxes unchanged except for taxes on net income and profits.

Last year, the BIR fell short of its P1.456-trillion goal by 8% but it surpassed its year-on-year collection by 10%. It collected P1.33 trillion last year, up from P1.217 trillion in 2013.