BIR grants tax breaks to frontliners

MANILA, Philippines — The Bureau of Internal Revenue (BIR) is now granting tax exemptions on retirement benefits of private sector employees and the income and sickness benefits of health workers – both public and private – serving in the frontlines against COVID-19.

Pursuant to the Bayanihan to Recover as One Act, Finance Secretary Carlos Dominguez III and Internal Revenue Commissioner Caesar Dulay issued Revenue Regulation No. 29-2020, which provides the guidelines to implement the grant of incentives on certain income payments of health workers.

Under the new regulation, the COVID-19 Special Risk Allowance and Actual Hazard Duty Pay shall be excluded from gross income and therefore not subject to income tax.

COVID-19 Special Risk Allowance is paid to private and public health workers directly in contact with COVID-19 patients, while the Actual Hazard Duty Pay is given to temporary Human Resources for Health (HRH) serving in the frontlines.

Also exempted from income tax are compensations paid to private and public health workers who have contracted COVID-19 in the line of duty amounting to P1 million in case of death; P100,000 in case of severe or critical illness; P15,000 in case of mild or moderate sickness.

This is provided that such amount is given from Feb. 1, 2020 and during the state of national health emergency as declared by the President; that the compensation is given not later than three months after date of confinement or death; and that supporting documents are submitted.

“For compensation in case of death, the said amount shall not be included as part of the gross estate of the decedent subject to estate tax,” the BIR said.

Tax-free retirement

Meanwhile, the BIR said retirement benefits received by officials and employees of private firms from June 5 to Dec. 31, 2020 are also not subject to the income tax, provided that the amount received is in accordance with a retirement plan duly registered with the agency.

The BIR, however, emphasized that any re-employment of such official or employee in the same firm and its related parties within the succeeding 12-month period shall be considered as proof of non-retirement.

As part of its transitory provisions, the BIR said taxes withheld from the retirement benefits by private employers should be refunded to the concerned employees.

“Concerned employers of the public or private health workers and HRHs shall likewise refund the income tax withheld from the said income payments after the year-end adjustment by the employer for purposes of determining the taxable compensation and the corresponding tax due of the employees,” the BIR said.

“The said adjustment will determine which employee has been withheld with more or less than the tax due. If the adjustment resulted in excess tax remittance, such excess shall be deducted or applied as deduction in the succeeding withholding tax remittance,” it added.