Does The Philippines Impose Taxes On Maternity Leave?

The Tax Alert is a tax alert issued to clarify the proper tax treatment of maternity leave benefits, particularly the salary differential paid by employers under Republic Act No. 11210 or the 105-Day Expanded Maternity Leave Law. The income tax exemption under Section 32 of the Tax Code only covers the SSS maternity benefits, i. e., the amount reimbursed by SSS to the employer. However, there is a problem with the income tax exemption under Section 32 of the Tax Code. Employers in the Philippines can deduct the salary differential they pay to employees on maternity leave, according to a 9 October 2019 circular issued by the Bureau of Internal Revenue.

The expanded maternity leave of women, regardless of civil status or the legitimacy of the child, is now tax-free under Republic Act No. 11210. The Commissioner of Internal Revenue has issued RMC No. 105-2019 dated 3 September 2019, clarifying the proper tax treatment of salary differentials to be paid in favor of female workers.

Maternity leave benefits are leave credits extended to covered female employees who may want to use them during their pregnancy and even after their delivery, so that they remain paid during such absence from work. A female public sector worker is entitled to full pay from her agency during her maternity leave, which may be received through a lump-sum payment or regular salary payment through the agency.

Employers in the Philippines are entitled to full pay with benefits, including health insurance, throughout their maternity leave. The maternity leave period was increased to 105 days with full pay, and an option to extend up to 30 days without pay. Solo mothers can also avail of an additional tax benefit.

Female government employees can claim maternity leave benefits from the SSS and PhilHealth if they meet the contribution requirements of The Philippines uses a graduated income tax. Employers must also account for other allowances, like 105 days of paid maternity leave.

How Do I Count 105 Days Maternity Leave In The Philippines?

The Expanded Maternity Leave Law (EML) in the Philippines grants 105 days of paid maternity leave to female employees after childbirth, without excluding weekends or holidays. This leave applies to all live births, regardless of delivery method, and includes an option for a 30-day unpaid extension. Additionally, solo parents under RA 8972 may receive an extra 15 days of paid leave. The counting begins from the day of childbirth, and all days, including Saturdays and Sundays, are considered in this duration.

Consequently, if maternity leave starts on a Monday, the employee would return to work after 105 calendar days, factoring in weekends and holidays. In cases of miscarriage or emergency termination of pregnancy, 60 days of paid leave is provided. This law ensures that all female workers, irrespective of civil status or the legitimacy of their child, are eligible for the maternity benefits. The revised law has increased the postpartum leave from the previous 60 days for normal delivery or 72 days for cesarean to a uniform 105 days.

Moreover, the leave can be availed as a combination of prenatal and postnatal leave, provided it does not exceed 105 days. Overall, the EML promotes adequate recovery and bonding time for new mothers.

How Has Maternity Benefit Changed In The Philippines?

In the Philippines, maternity benefits for new mothers have been significantly enhanced, transitioning from a 100-percent average daily salary credit to full pay. The Social Security System (SSS) calculates this benefit based on an employee's average daily salary credit. Effective from March 8, 2019, mothers who meet eligibility criteria can access up to 105 days of paid maternity leave, following the enactment of the 105-Day Expanded Maternity Leave Law (RA 11210) on February 20, 2019.

Notably, the law allows for a total of 105 days of paid leave for live births, with an option to extend for an additional 30 days without pay. This comprehensive law applies to all female employees, regardless of the delivery method, be it normal or cesarean. The SSS Maternity Benefit serves as a cash allowance for mothers unable to work due to childbirth, miscarriage, or emergency termination of pregnancy. Following the passage of this law, the government continues to support Filipino mothers through SSS and PhilHealth.

The initiative, led by the Department of Labour and Employment (DOLE), emphasizes the importance of maternal health and facilitates recovery, bonding with newborns, and adaptation to motherhood demands, thereby acknowledging women's social responsibilities.

Is Maternity Leave Taxable In The Philippines?

An early Christmas gift for Filipino women is now official! The 105-Day Expanded Maternity Leave Act, or Republic Act No. 11210, entitles female workers in both private and public sectors to receive their full salary during maternity leave, which lasts for a total of 105 days and is non-taxable. This law, signed by President Rodrigo R. Duterte on February 20, enhances maternity benefits from the previous 100% average daily salary to full pay.

Clarifications surrounding the tax treatment of maternity leave benefits have been provided, stating that salary differentials paid by employers during maternity leave are considered non-taxable benefits under the Social Security Law. Female public sector workers can receive their pay through lump sums or regular salary payments.

Under the new regulations, all women, whether married or not, in both formal and informal sectors, are covered. Employers are allowed to deduct the salary differential they pay to those on maternity leave, as communicated by the Bureau of Internal Revenue (BIR) in an October 9, 2019 circular. Furthermore, the BIR’s Revenue Memorandum Circular No. 105-2019 confirms that these maternity benefits are tax-exempt. Thus, Filipino women can feel more secure during their maternity leave, knowing they will receive full pay and benefits throughout their time away from work.

Is Labor Taxable In The Philippines?

Under the TRAIN law, Filipinos earning over ₱250, 000 annually must pay income tax. Employers in the Philippines are responsible for withholding taxes, encompassing income tax, social security, health insurance, and the Home Development Mutual Fund. Foreign companies can hire locals and manage payroll through a local entity, allowing for efficient payroll integration. Overtime pay is taxable; if it exceeds ₱250 monthly, both employer and employee must pay taxes on it.

Employees must be paid bi-weekly or semi-monthly, with no single pay period exceeding sixteen days apart. Minimum wage earners are exempt from withholding tax and annual income tax returns. Employees, except domestic and target-based workers, are entitled to overtime pay for exceeding eight work hours daily. The Labor Code mandates daily wage payment for non-working regular holidays, with the country observing 12 regular and 3 special holidays yearly.

Philippines employs a territorial tax system where only domestic income is taxed, while foreign earnings generally remain untaxed. Employers are legally obliged to comply with payroll laws, which include remitting employee contributions to the Pag-IBIG Fund. All employee remuneration, unless legally exempt, is subject to income tax, with employers required to withhold and remit these taxes to the BIR.

Additionally, the taxation of income earned by aliens in the Philippines reflects the same principles. Overall, navigating these laws demands careful attention to ensure compliance with existing regulations in the Philippines.

Are Expanded Maternity Leave Benefits Tax-Exempt?

In February, President Rodrigo R. Duterte signed Republic Act No. 11210, known as the 105-Day Expanded Maternity Leave Law (EMLL), which provides working mothers with expanded maternity leave benefits that are fully tax-exempt. The Bureau of Internal Revenue (BIR), through RMC 105-2019, confirmed that both the maternity benefits and the salary differential are tax-free, recognizing this as a rightful tax break for female employees. The Department of Labor and Employment (DOLE) also clarified that mothers are entitled to these non-taxable benefits under Republic Act No.

11210. This means that mothers can receive their full salary for the entire duration of the 105-day leave without the burden of taxes. Senator Risa Hontiveros highlighted the improvements in maternity benefits, emphasizing that the salary differential under the EMLL is considered a benefit under the Social Security System (SSS) Act, thus exempt from income tax and withholding tax. As a result, employers can claim tax deductions for these salary differentials.

The BIR’s ruling ensures that expectant mothers in the private sector can enjoy tax-free benefits, marking a significant improvement in maternity benefits while aligning with the provisions set by the EML.

How Is Maternity Leave Pay Calculated In The Philippines?

In the Philippines, maternity leave benefits are calculated using the formula: 100% of the Average Daily Salary Credit (ADSC) multiplied by 105 days. Female workers are entitled to 105 days of paid maternity leave for live childbirth, with the option to extend for an additional 30 days without pay. This leave can commence as early as 45 days before the expected delivery date. The law, through the Expanded Maternity Leave (EML), also ensures that employees receive their full salary during this period, with employers advancing the SSS maternity benefits, which are later reimbursed by the SSS.

Maternity leave includes weekends and holidays in its counting and begins from Day 1 of the leave. Pregnant employees, whether in the public or private sector, can benefit from this law, which affirms their rights and provides essential compensation during maternity leave. Additionally, maternity leave employees are entitled to the 13th-month pay, calculated based on their pay during maternity leave.

This comprehensive overview illustrates the mandatory provisions under Philippine Labor Laws that grant female workers the security and support necessary for their maternity period, empowering them in both their personal and professional lives.

What Are Non-Taxable Allowances In The Philippines?

De minimis benefits in the Philippines refer to non-taxable employer-provided perks valued at a maximum of PHP 90, 000 annually, exempt from income and withholding tax. These minor allowances include meal, uniform, and rice subsidies, contributing to employees' general welfare. Typically, all forms of compensation are taxable unless explicitly exempted under local laws. For minimum wage earners, any amount exceeding the PHP 90, 000 limit becomes taxable.

Non-taxable benefits also encompass SSS/GSIS contributions, and the distinction between de minimis benefits and taxable fringe benefits is crucial for HR professionals and business owners. Specific allowances recognized as de minimis include a PHP 250 monthly medical allowance for dependents, PHP 2, 000 rice allowance, and PHP 300 laundry allowance. Revenue Regulations No. 11-2018 lists 11 types of non-taxable de minimis fringe benefits, such as monetized unused vacation leave not exceeding 10 days.

COLA is also non-taxable, varying regionally. While de minimis benefits enjoy tax-exempt status, any allowances not included in the defined categories, like communication or travel allowances, may be taxable, subject to applicable limits, ensuring compliance with tax regulations.

Is Maternity Leave Tax-Free?

Under Republic Act No. 11210, known as "The Expanded Maternity Leave Law," salary differentials are now tax-free as benefits, according to the Bureau of Internal Revenue (BIR). Although federal law does not mandate paid family leave, the Family and Medical Leave Act (FMLA) outlines certain employer obligations. Section 45S of the Internal Revenue Code offers tax credits to employers that provide paid family and medical leave, allowing up to 12 weeks of leave annually under a written policy.

Paid family leave (PFL) supports employees caring for seriously ill family members or bonding with newborns/adopted children. Employers providing paid leave can claim credits for tax years 2018 and 2019, promoting equity as low-wage workers and marginalized groups often have less access to paid leave. Maternity benefits, funded through Employment Insurance (EI), may be taxable; however, universal charges do not apply. The taxable aspect of maternity benefits will be deducted from tax credits.

Maternity pay is treated differently as only wages paid for 12 weeks of leave are exempt, marking a distinction from long service and annual leave. Paid Parental Leave (PPL) is considered taxable income, affecting income tests for other payments.

Can Employers Deduct Salary Differential On Maternity Leave In The Philippines?

Employers in the Philippines can deduct the salary differential paid to employees on maternity leave, as clarified in a Bureau of Internal Revenue circular dated October 9, 2019. This follows the extension of paid maternity leave to 105 days, effective from March 2019. Under this law, female workers in the private sector now receive full pay, which includes the SSS maternity benefit based on their average daily salary credit, plus any salary differential paid by the employer.

The employer is responsible for the salary differential if the cash benefits from the SSS are less than the employee's full salary. Employers must ensure the deduction aligns with the employee's authorization, and they will only be reimbursed for the amounts they have directly paid to the employee. The salary differential is considered taxable income for the female worker. Additionally, employers must continue to remit contributions to SSS, PhilHealth, and Pag-IBIG during the maternity leave period.

There are also stipulations for paid leave in cases of miscarriage or emergency termination of pregnancy. The salary differential will be included as part of the basic salary for 13th month pay calculations for rank-and-file employees. However, there are no tax exemptions for the salary differential as interpreted by the Bureau of Internal Revenue.

Is Paternity Leave Taxable In The Philippines?

In the Philippines, self-employed individuals must report maternity, adoptive, health and safety, paternity, and parent's benefits received after specified dates as taxable social welfare income. A circular clarifies that salary differentials for maternity leave are exempt from income tax, allowing employers to claim deductions. Married male employees in both private and public sectors are entitled to seven days of paid paternity leave for the first four deliveries of their legitimate spouse.

This entitlement extends to government employees and is governed by Civil Service rules. Paternity leave, granted under Republic Act 8187, is accessible to all married men regardless of employment status, provided they live with their pregnant wives. Additionally, solo parents can access seven days of paid leave under the Solo Parents' Welfare Act (R. A. No. 8972) to fulfill their parental duties. The Paternity Leave Law allows fathers to support their partners during crucial moments, emphasizing its importance in family dynamics.

Moreover, according to tax rules, maternity leave in the public sector is considered paid leave but is subject to taxation, contrasting with the tax-free status of certain benefits. The Bureau of Internal Revenue recognizes salary differentials as benefits under Social Security Law, confirming the broad application of these regulations to support working families effectively.

How Much Contribution For SSS To Avail 70K Maternity Benefits?

To qualify for the SSS maternity benefit, a female member must have made at least three contributions within the 12 months preceding the semester of childbirth, miscarriage, or emergency termination of pregnancy (ETP). In 2024, eligible members can receive a maximum benefit of ₱70, 000. To ensure eligibility for this amount, the member must notify SSS 60 days after conception and use the benefits calculator to estimate potential benefits based on their Monthly Salary Credit (MSC).

The benefit amounts vary: up to ₱80, 000 for solo mothers and ₱40, 000 for cases of miscarriage or ETP. To claim the maximum, monthly contributions should reach ₱4, 200 for an MSC of ₱30, 000. Members must document their civil and employment status and confirm the legitimacy of the child to access expanded maternity leave benefits. The benefits are calculated based on the six highest contributions within the specified 12-month period. The SSS maternity benefit serves as a daily cash allowance during the period of maternity leave, typically lasting 105 days, contingent on prior contributions meeting the set requirements.

Does Maternity Benefit Taxable In The Philippines?

Employers in the Philippines are responsible for paying the difference between the maternity benefit from the Social Security System and the employee's regular wage. The Bureau of Internal Revenue, through Revenue Memorandum Circular (RMC) 105-2019, has confirmed that this salary differential is exempt from income and withholding taxes, allowing employers to claim tax deductions. Under Republic Act No.

11210, or the 105-Day Expanded Maternity Leave Law, female workers in both public and private sectors are entitled to a total of 105 days paid maternity leave for childbirth, regardless of delivery method, with an optional extension of up to 30 days without pay.

The maternity benefit consists of the full salary, which includes the maternity benefit based on average salary credit and any salary differential. Senator Risa Hontiveros announced this tax exemption for maternity benefits as a necessary improvement for new Filipino mothers. Maternity leave, defined by the Expanded Maternity Leave Law, provides female employees with income continuity during pregnancy and postpartum. Although maternity leave benefits are generally non-taxable, the salary differential was traditionally considered taxable.

Recent clarifications from the Bureau of Internal Revenue elucidate that this differential is now recognized as a tax-free benefit under the Social Security Law, providing further financial relief to new mothers.