Tax-Free Maternity Benefits

Women workers and employees are entitled to receive tax-free maternity benefits under the expanded maternity leave law, according to the labor department.

In Department Advisory No. 01-A, Series of 2019, Labor Secretary Silvestre Bello III said the salary differential paid by the private sector employer to women employees availing of the expanded maternity leave is exempt from income and withholding taxes.

The salary differential is the difference between the full salary of the female worker during her maternity leave and the actual cash benefits received from the Social Security System.

The department advisory is pursuant to Revenue Memorandum Circular No. 105-2019 issued by the Bureau of Internal Revenue which clarifies the proper tax treatment of maternity leave benefits under the 105-Day Expanded Maternity Leave Law.

According to the memorandum circular, the provisions of RA 11210 and its implementing rules and regulations jointly issued by the Civil Service Commission, Department of Labor and Employment, and Social Security System prescribe that workers availing of the maternity leave period and benefits must receive their full pay.

The advisory amends Department Advisory No. 01 Series of 2019 in so far as the tax treatment of salary differential is concerned. (DOLE)