Under the TRAIN Law, the 13th month pay tax exemption in the Philippines covers up to ₱90,000 of your combined 13th month pay and other bonuses. Anything at or below that ceiling is excluded from gross income; only the portion above ₱90,000 is added to your taxable compensation for the year and taxed at the regular graduated rates.1Asian Development Bank. Republic Act 10963 – Tax Reform for Acceleration and Inclusion
What Counts Toward the ₱90,000 Ceiling
The ceiling is not just for the mandatory 13th month pay. The TRAIN Law groups it together with “other benefits,” which the law defines to include productivity incentives, Christmas bonuses, and similar employer-paid bonuses on top of the 13th month.1Asian Development Bank. Republic Act 10963 – Tax Reform for Acceleration and Inclusion
Add those items together across the calendar year. If the running total stays at or below ₱90,000, none of it is taxed. If it goes over, only the excess is taxable.
How the Excess Is Taxed
When your combined bonuses cross ₱90,000, your employer adds only the amount above the ceiling to your taxable compensation. That excess is taxed under the regular graduated income tax brackets, not at a special flat rate. Your employer acts as the withholding agent, so the tax typically comes out of your pay rather than being owed at filing time.
This is where higher earners get caught off guard. Steady monthly pay with a modest 13th month usually stays under the limit. But large performance or year-end bonuses stacked on top can push you over ₱90,000 without warning, and the deduction shows up on the December payslip. A running tally of every bonus-type payment during the year is the simplest way to see it coming.
A Worked Example
Say your 13th month pay is ₱22,000, your Christmas bonus is ₱15,000, and your company’s productivity incentive is ₱10,000. That totals ₱47,000, well below ₱90,000, so the full amount is tax-free.
Now take a higher earner whose 13th month pay alone is ₱75,000, plus a ₱30,000 year-end bonus. Combined, that’s ₱105,000. The first ₱90,000 stays exempt. The remaining ₱15,000 is added to taxable income and taxed at the applicable graduated rate.
Who Qualifies for the 13th Month Pay in the First Place
The exemption only matters if you’re entitled to 13th month pay to begin with. Every rank-and-file employee in the private sector who has worked at least one month during the calendar year is entitled to it. Regular, probationary, casual, and fixed-term workers all qualify, and the job title or wage computation method does not change the requirement.2ChanRobles Virtual Law Library. Revised Guidelines on the Implementation of the 13th Month Pay Law
Managerial employees are the boundary. If your role involves setting or recommending company policies, hiring and firing, or exercising authority beyond routine tasks, you fall on the managerial side and the mandate does not cover you. Workers who resigned or were terminated before year-end still get a pro-rated 13th month based on the basic salary earned during their months of service.3Department of Labor and Employment Bureau of Workers with Special Concerns. FAQs on 13th Month Pay
Will the ₱90,000 Ceiling Change
The TRAIN Law includes a provision requiring the threshold to be indexed to inflation every three years, with the National Economic and Development Authority publishing the adjusted figure. As of the most recent available guidance, the ceiling remains at ₱90,000. Watch for NEDA announcements in future adjustment periods.1Asian Development Bank. Republic Act 10963 – Tax Reform for Acceleration and Inclusion
If You Are a US Citizen Working in the Philippines
American citizens and green card holders working in the Philippines owe US federal income tax on worldwide income, and that includes 13th month pay. The Philippine ₱90,000 exemption does not carry over to your US return.
The Foreign Earned Income Exclusion lets qualifying expats exclude up to $132,900 of foreign earned income for the 2026 tax year, which typically absorbs the 13th month pay along with regular salary.4Internal Revenue Service. Figuring the Foreign Earned Income Exclusion If your total compensation exceeds the exclusion or you choose not to claim it, you can instead claim the Foreign Tax Credit for Philippine income taxes actually paid, reported on Form 1116. Income excluded under the FEIE cannot also generate a foreign tax credit.5Internal Revenue Service. Foreign Tax Credit
Separately, US persons with foreign bank accounts whose combined balances exceed $10,000 at any point during the year must file FinCEN Form 114 (the FBAR) by April 15, with an automatic extension to October 15. A Philippine account receiving your 13th month pay counts toward that threshold.6FinCEN.gov. Report Foreign Bank and Financial Accounts