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Manila Bulletin devider Business devider The Economy devider DOF, BIR push to raise tax-free ceiling for employee allowances

DOF, BIR push to raise tax-free ceiling for employee allowances

Published Oct 27, 2025 12:00 am  |  Updated Oct 25, 2025 02:20 pm

At A Glance

  • To account for rising consumer prices and living costs, the Department of Finance (DOF) and its attached agency, the Bureau of Internal Revenue (BIR), are seeking to raise the ceiling for tax-exempt benefits and allowances enjoyed by both private- and public-sector workers.
To account for rising consumer prices and living costs, the Department of Finance (DOF) and its attached agency, the Bureau of Internal Revenue (BIR), are seeking to raise the ceiling for tax-exempt benefits and allowances enjoyed by both private- and public-sector workers.
“Under this 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,” the DOF said in a statement released over the weekend.
In particular, the government is proposing to raise the tax-exempt ceiling for monetized unused vacation leave credits for private employees to 12 days from the current 10 days.
It is also seeking to raise the tax-free medical cash allowance for dependents to ₱2,000 per semester from ₱1,500, and to increase the rice subsidy to ₱2,500 per month from ₱2,000.
For uniform and clothing allowance, the tax-free limit will be raised to ₱8,000 per year from ₱7,000.
Other proposed increases include raising the annual cap for medical assistance to ₱12,000, laundry allowance to ₱400 per month, employee achievement awards to ₱12,000 per year, and Christmas or anniversary gifts to ₱6,000 per year.
Workers who do overtime or night shifts will take home more pay, as their tax-free meal allowance rises from 25 to 30 percent of the minimum wage.
Meanwhile, the combined limit for collective bargaining agreement (CBA) and productivity incentives will rise to ₱12,000 per year from ₱10,000.
“We always aim to ease the burden of taxpayers. Through this proposal, we want the public to truly feel relief, as they will be able to take home more income, which will help reduce their daily expenses,” DOF Secretary Ralph G. Recto said.
“These increases will have minimal impact on government revenues but will definitely make a significant difference for our workers,” he added.
“We will uphold fairness in our tax system. We assure our micro, small, and medium enterprises (MSMEs) and large corporations that have been lawfully paying their taxes that you will be treated justly,” the finance chief concluded.

Related Tags

Bureau of Internal Revenue (BIR) Department of Finance (DOF) Finance Secretary Ralph G. Recto
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