In line with President Ferdinand R. Marcos, Jr.’s directive to ease the burden on Filipino taxpayers, the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR) are proposing higher ceilings for tax-exempt benefits received by private and public sector workers to protect the welfare of Filipinos.
This move is in line with the Marcos, Jr. administration’s commitment to inclusive growth, better labor conditions, and overall social protection of Filipino families.
“These changes are not just about numbers—they are about fairness and dignity in the workplace. Every Filipino worker deserves to benefit from the nation’s growth,” President Marcos, Jr. said in his departure statement to Malaysia for the 47th ASEAN Summit and Related Summits on October 25, 2025.
“Lagi po nating hangarin na mapagaan ang pasanin ng mga taxpayers. Sa proposal na ito, gusto nating maramdaman talaga ng taumbayan ang ginhawa dahil mas lalaki ang maiuuwi nilang kita at matutulungan nitong maibsan ang gastusin nila sa araw-araw,” Finance Secretary Ralph G. Recto said.
“These increases will have minimal impact on the government revenues but will definitely make a significant difference for our workers,” he added.
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 tax-exempt ceiling for monetized unused vacation leave credits for private employees will be increased from 10 to 12 days, while the current uncapped benefit for government employees’ monetized vacation and sick leave will be retained.
The limit for medical cash allowances for dependents will also be adjusted from PHP 1,500 to PHP 2,000 per semester, while rice subsidies will go up from PHP 2,000 to PHP 2,500 per month or its market equivalent.
Similarly, the non-taxable threshold for uniform and clothing allowance will increase from PHP 7,000 to PHP 8,000 per year.
Other proposed adjustments include increasing the ceiling for actual medical assistance from PHP 10,000 to PHP 12,000 per year, laundry allowance from PHP 300 to PHP 400 per month, employee achievement awards from PHP 10,000 to PHP 12,000 per year, and Christmas or anniversary gifts from PHP 5,000 to PHP 6,000 per year.
The tax-free limit for meal allowance for overtime or night-shift work will be raised from 25% to 30% of the minimum wage, while the combined ceiling for collective bargaining agreement (CBA) and productivity incentives will be adjusted from PHP 10,000 to PHP 12,000 per year.
In addition, Secretary Recto instructed the BIR to explore possible exemptions for certain taxpayer segments from the obligation to withhold and remit creditable withholding taxes. The DOF and the BIR are also studying ways to simplify and lower the applicable withholding tax rates to reduce compliance costs for taxpayers.
President Marcos, Jr. likewise reaffirmed the government’s firm commitment to integrity in public finance and taxation, emphasizing that the BIR will recalibrate its priorities to ensure that those found complicit in irregularities surrounding flood control projects are held accountable under the law.
“We will uphold fairness in our tax system. We assure our micro, small, and medium enterprises and large corporations who have been lawfully paying their taxes, that you will be treated justly,” the President stressed.
DOF HEARTS Series
This series showcases how the DOF is funding the nation’s HEARTS (H-health, E-education, A-agriculture and environment, R-roads and infrastructure, T-technology, and S– security and social protection) to bring us to Bagong Pilipinas.
