DOF, BIR propose higher tax-exempt benefits for workers

INQUIRER FILE PHOTO

MANILA, Philippines — The Department of Finance (DOF) and Bureau of Internal Revenue (BIR) have proposed to increase the ceilings for tax-exempt benefits for employees of the public and private sectors in a bid to protect their welfare and promote inclusive growth.

In a statement, DOF Secretary Ralph Recto said that the increase in tax-exempt benefits “will have a minimal impact on the government revenues but will definitely make a significant difference for our workers.”

“Under the proposal, employees in both private and government service will enjoy higher non-taxable allowances and benefits to account for inflation and rising living costs as well as enhance competitiveness across sectors, while maintaining prudent fiscal management,” the DOF said in the same statement.

READ: Tax evaders to be held accountable — Marcos

In his departure speech for the Association of Southeast Nations Summit 2025 to Malaysia on Saturday, President Ferdinand Marcos Jr. said that the “DOF and BIR have submitted proposals for the increase of ceilings for the tax-exempt de minimis benefits” in line with his directive to providing tax relief “to those who need it the most.”

“These changes are not just about numbers. They are about fairness and dignity in the workplace,” Marcos added.

Further, the DOF said that the tax-exempt ceiling for monetized unused vacation leave credits for private employees will increase from 10 to 12 days, while the uncapped benefit for government employees’ monetized vacation credits will be retained.

Aside from this, the DOF noted that the medical cash allowances for dependents will be adjusted from P1,500 to P2,000 per semester while rice subsidies will increase from P2,000 to P2,500 monthly. The annual uniform and clothing allowance will also climb from P7,000 to P8,000.

The DOF and BIR proposed to increase the ceiling for actual annual medical assistance from P10,000 to P12,000; laundry allowance from P300 to P400 monthly; annual employee achievement awards from P10,000 to P12,000; Christmas or anniversary incentives from P5,000 to P6,000.

READ: Flood control corruption cripples PH business confidence

The proposal also includes raising of tax-free meal allowance for overtime or night-work shifts from 25% to 30% of the minimum wage, while a combined ceiling for collective bargaining agreement and productive incentives will annually grow from P10,000 to P12,000.

More possible exemptions

Meanwhile, Recto has also directed the BIR “to explore possible exemptions for certain taxpayer segments from the obligation to withhold and remit creditable withholding taxes.” Aside from this, the two agencies are looking into simplification and lowering of applicable withholding tax rates to ease compliance costs for taxpayers.

Marcos also vowed for fairness in the country’s system, noting that the BIR “will recalibrate its priorities and ensure that all those found complicit in the irregularities surrounding flood control projects are held fully accountable under the law.”

With this, he assured just treatment for micro, small, and medium enterprises and large corporations who are lawfully compliant to their taxes. /jpv