Types of Taxable Compensation
What categories are subject to income tax in general situations?
Gross compensation income is defined as taxable income arising from an employer/employee relationship and
includes the following.
Salaries, wages, compensation, commissions, emoluments, and honoraria.
Bonuses exceeding PHP 30,000.
Allowances for transportation, representation, entertainment, and other similar items.
Fees (including director’s fees paid to a director who is at the same time an employee of the payer).
Taxable pensions.
Taxable retirement pay.
Other income of a similar nature, including compensation paid in-kind.
Tax-Exempt Income
Gross income subject to tax does not include the following.
Statutory minimum wage.
Damages received by an employee or his/her heirs following a judgment or agreement arising out of or
related to an employer-employee relationship.
Proceeds of life insurance policies.
Gifts, bequests, and devises.
Compensation for injuries or sickness.
Retirement benefits, pensions, and gratuities.
Interest on tax-exempt government securities.
Thirteenth-month pay and other benefits such as productivity incentives and Christmas bonus subject to the
PHP 30,000 limit.
Certain other items specifically provided as not taxable including the following.
o Amount received by the insured as return of premium.
o Income exempt from treaty.
o Certain prizes and awards exempted by law.
o Certain prizes and awards in sports competition.
o GSIS, SSS, Medicare, and other contribution.
o Gain from sale of bonds, debentures, or other certificate of indebtedness with a maturity of
more than five years.
o Gains from redemption of shares in mutual fund.