New military allowances not tax-exempt – BIR

MANILA, Philippines - The Bureau of Internal Revenue (BIR) has clarified ahead of a budget release next week that the new military allowances granted under President Aquino’s order on pay hikes would be subject to income tax.

“The monthly provisional allowance and monthly officers’ allowance given to military personnel/officers under the recently signed EO are subject to income tax,” Revenue Memorandum Circular 19-2016 stated.

Aquino, who signed Executive Order (EO) 201 last Feb. 19, authorized the first tranche of salary adjustments for government employees under the proposed Salary Standardization program, which is still stuck in Congress.

Last Wednesday, Budget Secretary Florencio Abad issued two new circulars that effectively implemented the EO, which also included the allowances for the military.

“(This is) an interim measure to supplement the total compensation until such time that a pension reform measure is passed in Congress,” Abad said in National Budget Circular 562.

But the BIR made it clear that the new set of allowances is not among those covered by tax exemptions on military benefits as provided by Republic Act 9040.

It reasoned that under Section 3 of RA 9040, only the longevity pay, collateral pay and the hazard, mandatory and clothing allowances are exempted from taxes.

The BIR circular stressed that those that are not mentioned in Section 3 should be taxed.

Aside from the new set of allowances, the EO also increased the hazard pay of uniformed personnel from P290 to P390 a month.

Abad said on Wednesday that the P57.91-billion fund will be released next week and is just short of the final permits that each government agency needs to submit.

“This will ensure that they (state workers) will get at least the first tranche of the pay increase that we have planned for them,” Abad said in a statement.