BIR: Salary differential under Expanded Maternity Leave is tax-free

MANILA, Philippines – The Bureau of Internal Revenue (BIR) has clarified that the salary differential under the Expanded Maternity Leave (EML) will be tax-free.
BIR: Salary differential under Expanded Maternity Leave is tax-free

Aside from enjoying 105 days of maternity leaves, new mothers can also enjoy a salary differential that is exempt from income and withholding taxes.

BIR Commissioner Caesar Dulay released the Revenue Memorandum Circular (RMC) No. 105-2019 dated September 3, posted on the BIR website only on October 9, to clarify that the salary differential under the EML is considered a "benefit" and should therefore be tax-free.

The RMC states, "The maternity benefit of the female worker has been expanded from the previous 100 percent of the average daily salary credit to full pay or salary, which includes now the salary differential as its component … it is therefore clear that salary differential is considered as a benefit."

According to BIR, the Expanded Maternity Leave Law's implementing rules have expanded the benefits of a female employee to a full pay, which now includes the salary differential.

Salary differential is the amount paid by the employer to their female employees on maternity leave. It is the difference between the employee's salary and the cash benefits from Social Security System (SSS).

Previously, the Department of Labor and Employment (DOLE) and Social Security System (SSS) regarded the salary differential as part of an employee's salary and was subject to taxes.

Senator Risa Hontiveros, author and principal sponsor of the EML Law lauded the BIR's decision to also take care of the female worker's finances while on leave.

She said, "This is welcome news indeed. Now mothers and their families will not only be able to enjoy the biological benefits of the EML law, but their financial welfare is also looked after."

— Sally, The Summit Express

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