QuestionsQuestions (PROCLAMATION NO. 28)
To exclude from the computation of gross compensation income (and thus from taxable compensation income and withholding tax on wages) the 13th month pay and certain other benefits mandated by specified laws, within stated limits, as amended to Section 28(b)(8) of the NIRC.
Section 28(b)(8) of the NIRC, as amended, by inserting a new sub-paragraph (F) at the end.
Benefits received by officials and employees of national and local governments pursuant to R.A. No. 6686; benefits received pursuant to P.D. No. 851 as amended by Memorandum Order No. 28; benefits received by officials and employees not covered by P.D. No. 851 as amended; and other benefits such as productivity incentives and Christmas bonus not exceeding P12,000, integrated in the 13th month pay solely for purposes of the Act.
The exclusion applies only to the first P30,000.00 (in the aggregate amount) of the 13th month pay and other benefits received or accrued beginning January 1, 1994.
“Other benefits” such as productivity incentives and Christmas bonus are limited to an amount not exceeding P12,000.00, and this P12,000 is integrated in the 13th month pay solely for purposes of the Act.
No. Only up to P12,000.00 of the “other benefits” component is integrated for exclusion; the portion exceeding P12,000 is taxable, subject to withholding tax, and in any case the overall exclusion is capped at P30,000.
Only the first P30,000.00 in the aggregate is excluded from taxable compensation income/withholding tax; the excess beyond P30,000.00 is taxable and subject to withholding tax to the extent of the excess.
Benefits paid or accrued beginning January 1, 1994 are covered.
They are authorized not to deduct/withhold the succeeding payroll withholding taxes corresponding to the amount previously withheld; any excess tax withheld should be refunded immediately to the employees or credited against tax due from compensation beginning January 1995, and the employer may credit and deduct subsequent remittances.
The employer should no longer remit that amount to the BIR and should instead refund the withheld amount to the concerned employees.
No. The circular states that it covers officials and employees of the national government, local government units, agencies including GOCCs, as well as officials and employees of private corporations and entities.
It means that, for tax exclusion purposes under R.A. No. 7833, the qualifying “other benefits” up to P12,000 are treated together with the 13th month pay when applying the overall P30,000 exclusion, even if these benefits are conceptually separate.
Because the “other benefits” component totaling P18,000 exceeds the P12,000 maximum allowable “other benefits” exemption, leaving P6,000 as taxable “other benefits” subject to withholding tax on wages.
P15,000.00 13th month pay plus the maximum allowable exemption of P12,000.00 for “other benefits,” totaling P27,000.00 excluded.
To clarify (1) how much of the “other benefits” component exceeds the P12,000 cap and becomes taxable, and (2) how the allowed P12,000 is combined with the 13th month pay to determine the overall excluded amount for taxable compensation.
They are excluded from taxable compensation income and therefore generally exempt from withholding tax on wages (for the amounts covered by the exclusion).
It states that it is desired that the Circular be given as wide a publicity as possible.