Senate Officp of the Ectrotary TWENTIETH CONGRESS OF THE) First Regular Session 26 MAR 19 All :14 SENATE S.B. No. _ 2005 RECEIVED BY: Introduced by SENATOR IMEE R. MARCOS AN ACT INCREASING THE TAX-EXEMPT THRESHOLD FOR PERSONAL INCOME TAX AND THE TAX-EXEMPT CEILING FOR DE MINIMIS BENEFITS, AMENDING FOR THE PURPOSE SECTIONS 24 AND SECTION 32 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES EXPLANATORY NOTE Article II, Section 18 of the 1987 Constitution provides that "The State affirms labor as a primary social and economic force. It shall protect the rights of workers and promote their welfare." Article XIII, Section 3 further mandates that "The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in the fruits of production." Republic Act No. 10963, otherwise known as the "Tax Reform for Acceleration and Inclusion (TRAIN)" Law, introduced adjustments to the personal income tax system to provide relief to taxpayers. However, since its implementation in 2018, persistent inflation and the rising cost of living have significantly eroded the intended benefits of these tax reforms. The continued increase in the prices of basic goods and services, particularly in food, transportation, and housing, has reduced the purchasing power of Filipino workers. Moreover, the existing tax structure has resulted in "bracket creep," whereby nominal increases in wages cause taxpayers to fall into higher tax brackets despite no real improvement in income. There is, therefore, a need to update the personal income tax system to ensure that it remains equitable, responsive, and aligned with prevailing economic conditions. This bill seeks to: (1) increase the tax-exempt income threshold from Php 250,000.00 to Php 500,000.00 to protect the real incomes of taxpayers and restore progressivity in the tax system; and (2) increase the tax-exempt ceiling for de minimis benefits from Php 90,000.00 to Php 200,000.00, in recognition of their role in supporting the welfare of employees.
In view of the foregoing, the passage of this measure is earnestly sought. Tree h. Maves AMEE R. MARCOS
Selate Oftice of the a cretary TWENTIETH CONGRESS OF THE) REPUBLIC OF THE PHILIPPINES 26 MAR 19 Al1:14 First Regular Session SENATE S.B. No. 2005 RECEIVED BY: Introduced by SENATOR IMEE R. MARCOS AN ACT INCREASING THE TAX-EXEMPT THRESHOLD FOR PERSONAL INCOME TAX AND THE TAX-EXEMPT CEILING FOR DE MINIMIS BENEFITS, AMENDING FOR THE PURPOSE SECTIONS 24 AND SECTION 32 OF THE NATIONAL INTERNAL REVENUE CODE OF. 1997, AS AMENDED, AND FOR OTHER PURPOSES Be it enacted by the Senate and the House of Representatives of the Philippines in Congress assembled:
Section 1. Section 24(A)(2) of Republic Act No. 8424, otherwise known as the
"National Internal Revenue Code of 1997", as amended, is hereby further amended to read as follows: "SEC. 24. Income Tax Rates. - "(A) XXX "(1) XXX "(2) Rates of Tax on Taxable Income of Individuals. - The tax shall be computed in accordance with and at the rates established in the following schedule: "(a) Tax Schedule Effective January 1, 2018 until December 31, 2022: XXX Tax Schedule Effective January 1, 2023 [and onwards] UNTIL DECEMBER 31, 2026: XXX TAX SCHEDULE EFFECTIVE JANUARY 1, 2027 AND ONWARDS: TAXABLE INCOME TAX RATE NOT OVER P500,000 0%
TAXABLE INCOME TAX RATE OVER P500,000 BUT 15% OF EXCESS OVER NOT OVER P800,000 P500,000 OVER P800,000 BUT p45,000 20% OF NOT OVER EXCESS OVER P800,000 P1,600,000 OVER P1,600,000 P205,000 + 25% OF BUT NOT OVER EXCESS OVER P1,600,000 P4,000,000 OVER P4,000,000 P805,000 + 30% • OF BUT NOT OVER EXCESS OVER P4,000,000 P16,000,000 p4,405,000 + 35% OF OVER P16,000,000 OVER EXCESS P16,000,000
Sec. 2. Section 32(B)(7)(e) of Republic Act No. 8424, otherwise known as the
"National Internal Revenue Code of 1997"; as amended, is hereby further amended to read as follows: "SEC. 32. Gross Income. - "(A) XXX "(B) xxx "(7) XXX "(A) XXX "(B) XXX "(C) xXX "(D) xxx (E) 13th Month Pay and Other Benefits. - Gross benefits received by officials and employees of public and private entities: Provided, however, That the total exclusion under this subparagraph shall not exceed [Ninety thousand pesos (P90,000)] TWO HUNDRED THOUSAND PESOS (P200,000) which shall cover: (i) Benefits received by officials and employees of the national and local government pursuant to Republic Act No. 6686; (ii) Benefits received by employees pursuant to Presidential Decree No. 851, as amended by Memorandum Order No. 28, dated August 13, 1986;
(iti) Benefits received by officials and employees not covered by Presidential Decree No. 851, as amended by Memorandum Order No. 28, dated August 13, 1986; and (iv) Other benefits such as productivity incentives and Christmas bonus."
Sec. 3. Separability Clause. - If any provision or part hereof is held invalid or
unconstitutional, the remainder of the law or the provision or part not otherwise affected shall remain valid and subsisting.
Sec. 4. Repealing Clause. - Any law, presidential decree or issuance, executive
order, letter of instruction, administrative order, rule, or regulation contrary to or inconsistent with the provisions of this Act are hereby repealed, modified, or amended accordingly.
Sec. 5. Effectivity. - This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in at least two (2) newspapers of general circulation. Approved,