QuestionsQuestions (Republic Act No. 9040)
RA 9040 is titled the “AFP Tax Exemption for Pay and Allowances Act of 2001.”
RA 9040 cites Section 5, Article XVI of the 1987 Constitution on professionalism in the AFP and adequate remuneration and benefits as a prime concern of the State. It justifies granting tax exemptions as support and incentives to AFP personnel.
It exempts: (1) longevity pay; (2) mandatory allowances (COLA, PERA, hazardous allowance); (3) collateral pay (specialist, combat, flying, air mechanic’s, sea duty, hazardous duty, instructor’s, parachutist’s, hardship pay); and (4) collateral allowances (special clothing, cold winter’s clothing and maintenance, winter clothing, initial enlistment/reenlistment allowance, laundry allowance).
It exempts only those specifically enumerated in Sections 3 and 4, plus “other benefits as provided for by law” as stated in the policy, and retirement/separation, death, and disability benefits covered by the referenced systems/laws.
The mandatory allowances are: (1) Cost of Living Allowance (COLA); (2) Personnel Economic Relief Allowance (PERA); and (3) Hazardous Allowance.
Collateral pay includes: Specialist Pay, Combat Pay, Flying Pay, Air Mechanic’s Pay, Sea Duty Pay, Hazardous Duty Pay, Instructor’s Duty Pay, Parachutist’s Pay, and Hardship Pay. An example is Combat Pay.
Collateral allowances include: Special Clothing Allowance; Cold Winter’s Clothing Allowance and Cold Weather Clothing Maintenance Allowance; Winter Clothing Allowance; Initial Enlistment and Reenlistment Allowance; and Laundry Allowance. Examples: Laundry Allowance; Winter Clothing Allowance.
Benefits received under the AFP Retirement and Separation Benefits System (AFP-RSBS) under PD 361 (as amended by PD 1909), as well as death and disability benefits provided by law, are exempt from any tax of whatever nature.
It identifies the specific retirement and separation benefits system under which AFP benefits are exempt from tax (AFP-RSBS), as amended by PD 1909.
It goes beyond tax exemptions. Section 5 provides that all benefits, pay, and allowances mentioned in the Act shall not be subject to attachment, levy, and execution.
It means the listed pay/allowances should not be treated as taxable income for purposes of income tax under Title II of RA 8424 (Tax Reform Act of 1997).
The Secretary of Finance, in consultation with the Commissioner of Internal Revenue, is authorized to promulgate rules and regulations necessary to implement the Act.
It retroacts to January 1, 2001, despite its approval on March 22, 2001.
If any provision or its application is held invalid, the remainder of the Act or its application to other persons/circumstances is not affected—preserving the validity of unaffected parts.
It repeals, modifies, supersedes, or amends prior laws, decrees, executive orders, letters of instruction/implementation, rules and regulations, and other issuances that are inconsistent with RA 9040.
Not automatically. Section 3 provides a specific enumeration of exempt pay and allowances. Any allowance outside the list would not be covered unless it falls under “other benefits as provided for by law” in the policy or is otherwise covered by existing laws.