Tax Exemption of Monetized Leave Credits

The Government recognizes the valuable role of government officials and employees in providing vital services to the population.
The Government adopts a policy to continuously look for the welfare of government officials and employees.
The Government provides necessary additional funds for education, health, or other emergency expenses of officials and employees or members of their family through tax-free monetization of leave credits.
The Executive Order is issued to resolve confusion among government bodies arising from conflicting tax rulings on the taxability of monetized leave credits.
The Executive Order is intended to stop discouragement of monetization applications despite urgent or emergency needs.

Section 1 covers monetized leave credits of government officials and employees.
Section 3 directs implementation across heads of departments and agencies and others concerned.
The operative tax rule applies when leave credits are monetized by government officials and employees.

Section 1 requires that monetized leave credits of government officials and employees continue to be exempted from income tax.
The exemption is framed as a continuing status, preserving the existing tax treatment as tax-free for income tax purposes.

Section 2 abrogates all previous rulings, including a specific BIR tax ruling that subjected monetization of leave credits to income tax.
Section 2 specifically abrogates Section 2.78.1(A)(7), p. 27 of Revenue Regulation No. 2-98 dated April 17, 1998.
Section 2 states that the abrogated BIR ruling is inconsistent with the provisions of Republic Act (R.A.) No. 8424 and with the intended grant of the benefits.
Section 2 is grounded on the President’s authority under Section 17, Article VII of the Constitution to abrogate previous rulings.

Section 3 enjoins all heads of departments and agencies and others concerned to implement the Executive Order.
Section 3 requires strict observance of the Executive Order in government implementation.

Section 4 makes the Executive Order effective immediately, authorizing immediate compliance by concerned offices.
No post-issuance transition period is provided; compliance obligations are triggered upon effectivity.