Is 13th Month Pay Taxable in the Philippines?

Your 13th-month pay in the Philippines is tax-free up to 90,000 PHP, and that ceiling is shared with other year-end bonuses your employer pays you. Anything above 90,000 PHP gets added to your taxable compensation for the year and taxed at your regular graduated income tax rate. The threshold comes from the TRAIN Law (Republic Act No. 10963), and it still applies for 2026.1Lawphil. Republic Act No 10963

A bill in Congress (House Bill 7661) proposes raising the cap to 150,000 PHP, but it has not been enacted. Ninety thousand is the number that matters right now.

What the 90,000 PHP Cap Actually Covers

The exemption is not a slot reserved for the 13th-month check alone. It is a single bucket that also absorbs Christmas bonuses, productivity incentives, loyalty awards, and other non-discretionary bonuses tied to your employment.2Senate of the Philippines. Workers to Get Bigger 13th Month Pay, Christmas Bonus Starting This Year Your employer must total these when checking whether you have crossed the ceiling.

This is where people get tripped up. Say your 13th-month pay is 55,000 PHP and your employer also gives you a 40,000 PHP Christmas bonus. Combined, that is 95,000 PHP. The first 90,000 PHP stays exempt; the 5,000 PHP excess becomes taxable compensation. The 13th-month pay by itself was well under the limit, but the Christmas bonus pushed the total over.

De Minimis Benefits Do Not Eat the Cap

Rice subsidies, uniform allowances, medical cash allowances, and similar small perks do not count toward the 90,000 PHP cap. Each de minimis benefit has its own individual ceiling, and as long as it stays within that ceiling, the amount is fully tax-exempt on top of the 90,000 PHP threshold.3Bureau of Internal Revenue. Revenue Regulations No 29-2025

Revenue Regulations No. 29-2025 took effect on January 6, 2026, and set several of these limits:

  • Rice subsidy: 2,500 PHP per month
  • Uniform and clothing allowance: 8,000 PHP per year
  • Medical cash allowance for dependents: 2,000 PHP per semester
  • Actual medical assistance: 12,000 PHP per year
  • Christmas and anniversary gifts: 6,000 PHP per year
  • CBA and productivity incentive benefits (combined): 12,000 PHP per year
  • Employee achievement awards: 12,000 PHP per year

If any single de minimis benefit goes over its individual ceiling, only the excess is taxable. That excess is added to your ordinary compensation. It does not consume any part of the 90,000 PHP bonus cap.

How the Tax on the Excess Is Calculated

There is no special flat rate for the portion of bonuses above 90,000 PHP. The excess is folded into your annual compensation and taxed under the Philippines’ graduated income tax schedule. Whatever bracket your total taxable income falls into decides the rate.

Under the TRAIN schedule that applies from 2023 onward, annual taxable income of 250,000 PHP or less is taxed at 0%, and the non-zero brackets run from 15% up to 35%.1Lawphil. Republic Act No 10963 So if your salary already places you in the 25% bracket, the excess bonus is effectively taxed at 25%.

A worked example. You receive 120,000 PHP combined in 13th-month pay and Christmas bonus. The first 90,000 PHP is exempt. The remaining 30,000 PHP joins your annual salary. If that puts you in the 25% bracket, you pay roughly 7,500 PHP in extra tax on that surplus. Higher earners pay more on the same excess.

How the 13th-Month Amount Itself Is Computed

Presidential Decree No. 851 sets the benefit at one-twelfth of your total basic salary earned during the calendar year.4Labor Law PH Library. PD 851 – 13th Month Pay The word that matters is “basic.” Not everything on your payslip counts. The following are excluded unless your employment contract, a collective bargaining agreement, or established company practice treats them as basic salary:

  • Overtime pay, holiday pay, and night-shift differential
  • Cash equivalent of unused vacation and sick leave credits
  • Cost-of-living allowance (COLA)
  • Premium pay

If you earn a fixed wage plus commission, both count. The commission is pay for services rendered, not a discretionary allowance. Add up your basic-salary paychecks from January through December, divide by 12, and you have your 13th-month pay. Total basic salary of 300,000 PHP for the year means a 13th-month check of 25,000 PHP.

If You Resigned or Were Terminated Mid-Year

Leaving your job before December does not erase your entitlement. Employees who resign or are terminated at any point during the year are owed a proportionate amount, based on the fraction of the year actually worked.4Labor Law PH Library. PD 851 – 13th Month Pay Worked January through July? Your pro-rated 13th-month pay is the basic salary you earned over those seven months, divided by 12.

The same 90,000 PHP tax rule applies to the pro-rated amount, judged alongside any other qualifying bonuses you received that year. If your final paycheck leaves out the pro-rated amount, you can file a complaint with the Department of Labor and Employment.

Check Your BIR Form 2316

Employers issue BIR Form 2316 at year-end. It certifies your compensation and taxes withheld, and it itemizes taxable compensation separately from non-taxable benefits, including the exempt portion of your 13th-month pay. You should get yours on or before January 31.

Review the form. Confirm that the exempt amount was applied and that any bonus excess was correctly added to taxable compensation. If your employer failed to withhold on the excess, the shortfall generally shows up when you or the employer reconciles at year-end, and correcting it early avoids trouble later. If the numbers do not match what you were paid, raise it with your HR or payroll office before the BIR filing date passes.