Details about the 13th Month Pay & the Rules of Tax Deductions in PH
You might be wondering of the 13th Month Pay in the Philippines is also subject to tax deductions just like the salary that the employees receive.
Taxes make a cut from the total salary that an employee receives in the Philippines unless it is below Php 250,000 in a year. Certain pays including the 13th Month Pay are also subject to tax deductions under certain conditions.
The 13th Month Pay is mandated by the law in the Philippines. Employees who have worked for at least a year in a company or business, except those who are government workers and employees earning commission-based, are entitled to receive this type of pay that is usually given before December 24.
With regards to the rule for tax deductions on the 13th Month Pay, under the Tax Reform for Acceleration and Inclusion (TRAIN) Law, the pay is taxable if it exceeds the Php 90,000 maximum allowable amount for tax exemptions.
13th Month Pay is mandatory in the Philippines. It is also mandatory in several countries across the globe including Belgium, Greece, Italy, Portugal, Spain, India, Indonesia, Brazil, Costa Rica, El Salvador, and Mexico.
However, in some countries like the Portugal and Spain, the pay is extended to the employees in summer. It is because they give a 14th month pay for the eligible employees at Christmas. This is somehow similar to the case of government employees in the Philippines who get a mid-year and end-year bonus although they are exempted from the 13th month pay.
In Indonesia, it is mandated that the 13th Month Pay will be given before their Ramadan. In Brazil, it is paid between February and November and then in December.
In some countries like France, Germany, China, Japan, Singapore, and Chile, they have customary payments of the said type of pay.