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).