Implementation of Higher Cap (P82,000) for Tax-Exempt Bonuses and Other Benefits

There is a new cap for the exemption of bonuses and other benefits, from the former amount of P30,000. Under Republic Act (RA) No.10653, signed into law in 2015, gross benefits received by officials and employees of public and private entities up to a maximum amount of Eighty Two Thousand Pesos (P82,000) are excluded from the computation of the gross income of the recipients of such benefits, and thus, such amounts are exempt from income tax. To implement RA 10653, the Bureau of Internal Revenue (BIR) issued Revenue Regulations (RR) 3-2015. Here’s a briefer of RR 3-2015.

What is the coverage of the exemption?

RR 3-2015 clarified that the threshold amount of P82,000 shall only apply to the 13th-month pay and other benefits which covers only the following:

* Thirteenth-month pay equivalent to the mandatory one month basic salary of officials and employees of the government, (whether national or local), including government-owned or -controlled corporations, and or private offices received after the 12th-month pay; and

* Other benefits, such as Christmas bonus, productivity-incentive bonus, loyalty award, gifts in cash or in kind and other benefits of similar nature actually received by officials and employees of both government and private offices.

In no case shall the exemption apply to other compensation received by an employee under an employer employee relationship, such as basic salary and other allowances.

What kind of income-earners are included under the exemption and what period does it cover?

The exclusion from gross income is not applicable to self-employed individuals and income generated from business. The amount of P82,000.00 shall apply to the 13th month pay and other benefits paid or accrued beginning January 1, 2015. For benefits received last year, the applicable threshold amount would still be the old amount of P30,000.

What are the BIR compliance requirements?

All taxpayers-employers shall ensure the correct computation and application of the said increase on the 13th month and other benefits of the employees in the year-end adjustments, and the same shall be clearly indicated, among others, in the Certificate of Compensation/Tax Withheld (BIR Form No. 2316).

The said BIR form shall be issued by the employer to the employee on or before January 31 of the succeeding calendar year, or if the employment is terminated before the close of such calendar year, on the day the last payment of compensation is made.

What happens if the employee works for another company within the year?

If the employee whose employment was terminated is subsequently employed by another employer before the close of the calendar year, the employee is required to furnish the new employer the accomplished BIR form issued by the previous employer for the appropriate withholding tax computation of the employee’s regular compensation and subsequent year-end adjustment, if any.

Does Congress need to pass a new law to increase the cap again?

Under the law, the President has the authority to adjust the threshold amount every three years stated to its present value using the Consumer Price Index (CPI) to be published by the National Statistics Office (NSO).

35 thoughts on “Implementation of Higher Cap (P82,000) for Tax-Exempt Bonuses and Other Benefits

  1. Ted

    Hi there! We are getting incentives on a monthly basis but our company is deducting taxes from those incentives that we have been getting. I would like to ask if the ceiling for a year is only 10,000 because that is what they told us. As what I have seen it is at 30,000 and I even got more confused when I saw here that it was even increased at 82,000. I’m really sorry if I’m like a deer in headlights. I’m really not familiar with any of these things so I would really love to get some enlightenment. Thanks a million!

    Reply
    1. Steph

      If the incentives are fixed e.g. 20,000/month for 12 months (not variable) and can be forecasted then they just deduct the tax on your monthly payroll. If they do the tax computation on the 82k cap at year-end, you’re gonna get a pretty hefty tax on the last payroll period of the year. (or whichever period they chose compute for it)

      Reply
  2. Prudencio M.

    I would like to know Sir, if joining bonus or signing bonus, which is an inducement to work for a certain company, is included in the bonuses covered by Sec. 2.78.1 (B) as amended by Republic Act (RA) No.10653? Thank you in advance for your kind attention.

    Reply
    1. jb

      hi. good day. just want to know if how can we file a a complain about our bonuses in our company because they are still deducting taxes on the said bonuses…

      Reply
  3. Jake

    I just want to clarify the P82,000.00 ceiling. Is it computed based on gross annual, average annual or monthly bonus? The reason I asked is i received a productivity bonus of P34,000 more or less, my basic salary on such pay period was P4000+/- . My tax went up to around P10,000. There is no way the the basic salary was the basis of my tax. Thanks po!

    Reply
    1. Steph

      It’s based on cumulative annual value. It’s possible that your HR computes for the 82k capping at the end of the year and you’ll receive a tax refund. Best to ask your HR.

      Reply
  4. John

    Hi,

    Got a clarification regarding the first item. When you say RR 3-2015 clarified that the threshold amount of P82,000 shall only apply to the 13th-month pay and other benefits would that mean the P82,000 is a combined amount of 13th month pay, performance bonus and other bonuses? Your reply is highly appreciated

    Reply
  5. Armin C.

    With regard to RA 10653. Our company will give us our Christmas Bonus on November 4. But to my dismay, our Hrg requires us to produce receipts that equals the amount that will given to us . Receipts should be travelling exp, meals representation, gasoline exp among others. failure to do so, such bonuses will be taxed accordingly by the company. Any clarificatory explantion regarding the matter will be appreciated. Thank you.

    Reply
    1. LCT

      It seems like the company you’re working for will report your Christmas Bonus to the BIR as an operating expense rather than as employee compensation. It is a win-win situation for you and your company because 1) You’ll receive the whole amount untaxed 2) The company can claim the VAT in the receipts as input VAT which will reduce their VAT payable. BUT, this is bad practice and ILLEGAL.

      Reply
  6. Maren

    What if the basic is 130k …is the first 82k tax exempted then the rest has to have a tax or the whole 13th month will be taxed? Thanks

    Reply
  7. EliBoy

    Hi, will sick leave conversion be included in the 82k tax exemption for the year? Sick leave credits earned from the previous year and conversion payout done around February of the next succeeding year. I’m with a private company. Thanks. 🙂

    Reply
  8. Densedy

    Our HR told us today that the 82000 tax exempt might not take effect yet this year because our HR who attended the seminar held by BIR told them that there’s is no implementing guideliness yet. Is this true? As far as we know there is a BIR Regulation 3-2015 the says that 82000 bonus cap shall take effect on January 1,2015, how come that it will not take effect because of lack of guidelines.

    Reply
    1. sky

      those are mandatory deductions. they are not part of your taxable compensation nor de minimis benefits.

      Reply
  9. Phoebe

    RR 3-2015
    * Other benefits, such as Christmas bonus, productivity-incentive bonus, loyalty award, gifts in cash or in kind and other benefits of similar nature actually received by officials and employees of both government and private offices.

    -Sir, I have a question regarding the productivity-incentive bonus, is it on a per month or annual basis. Assuming that a person’s monthly productivity-incentive bonus is around 20,000 will that person be exempted from tax since the monthly bonus is below 82,000 or will it be taxed since the total bonus for the year is more than 82,000?

    Reply
    1. Steph

      Your monthly productivity-incentive bonus will be total-led at the end of the year. The amount that exceeds 82k will be taxed. This is assuming that you have no other compensation that adds to the 82k cap e.g. 13th month pay,

      Reply
  10. Popoy

    Hi, we just received our 13th month today, and to my surprise it is much lower than what i expected. When our payroll replied to me, they said that despite my 13th month being lower than 82K, the deduction was based on the total bonuses received for the year. I was under the impression that taxes are applied on a per pay basis, meaning, if in that particular pay out the bonus amount is less than 82K it will be exempted from tax. Now what they’re saying is that it’s the sum of all bonuses for the year which will be considered.

    Reply
      1. abby

        Hi sir, how much tax does a private company shall deduct to the 82k annual incentives? My company usuay deduct 32% every quarter which usually about (30k-50k) incentives. They say that they are already deducting tax so that if we hit 82k up by the end of the year it would be easy in our pocket. But i think, its not fair. Ty!

        Reply
  11. Raquel marie

    Goodmorning. This can be so unfair to us working in BPO industry since we are earning more than 82k from our incentives and bonuses. And government taxes are really hurting us each time we receive our monthly bonuses. 82k limit is not really enough. Thank you

    Reply
  12. Unknown

    just want to share…fixed monthly bonus ako…around 8-9k per month ang tax ko….Just received our ITR and BOOOOOMM… 4 digits ang almost nakuha nmn…around 15-20k meron pang 40k because ngkaanak sila,,..ramdam na ramdam,, ung 82,000 is not monthly its annually exemptions, like your dependent exemptions… depende nlng sa HR ng company kung paano nila ipapasok ang computation sa 13th month na 82,000.. kasi hindi nmn tlga 82k ang 13th month ntn… for example your monthly salary is 15k…so ang expected 13th month mo is around 14-15k… less sa 82k is 62k… yung 62k pwede nilang ipasok dyan ung mga allowances, bonuses etc na taxable….

    Reply

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