The Health Emergency Allowance (HEA), formerly known as One COVID-19 Allowance (OCA), was established to recognize the critical service of healthcare workers (HCWs) and non-healthcare workers during the COVID-19 public health emergency. As disbursements continue, a primary legal concern for both employers and recipients is whether these benefits are subject to Philippine income tax.
Under the current framework of the National Internal Revenue Code (NIRC) and specific Department of Health (DOH) guidelines, the answer depends largely on the recipient's employment status and total annual compensation.
1. Legal Basis of the HEA
The HEA is mandated under Republic Act No. 11712, also known as the "Public Health Emergency Benefits and Allowances for Health Care Workers Act." This law ensures that all public and private health workers receive standardized compensation based on their risk exposure (Low, Medium, or High).
While RA 11712 outlines the right to receive the allowance, it does not explicitly grant a blanket tax exemption for the benefit. Therefore, the tax treatment falls under the general rules of the Bureau of Internal Revenue (BIR).
2. Is HEA Taxable?
In general, the HEA is considered taxable income, but it often falls under specific exemptions that result in zero tax liability for the majority of healthcare workers.
A. For Government Employees
For those in the public sector, the HEA is treated as part of their "other benefits." Under the TRAIN Law (Republic Act No. 10963), de minimis benefits and "other benefits" (such as the 13th-month pay and various allowances) are non-taxable provided the total amount does not exceed ₱90,000 in a single taxable year.
- If total benefits < ₱90,000: The HEA is tax-exempt.
- If total benefits > ₱90,000: The excess amount is added to the individual's taxable income and taxed at the applicable graduated rates.
B. For Private Sector Employees
Similar to the public sector, the HEA provided to private healthcare workers is included in the computation of the ₱90,000 tax-exempt threshold for "13th-month pay and other benefits."
C. For Individuals under Contract of Service (COS) or Job Order (JO)
The BIR has previously clarified through various rulings (e.g., BIR Ruling No. 293-20) that benefits paid to COS and JO workers—who do not have an employer-employee relationship with the government—are generally subject to creditable withholding tax (usually 5% or 10%) if their total annual gross income exceeds ₱250,000.
3. Key Distinctions in Tax Treatment
| Category | Tax Status | Conditions |
|---|---|---|
| Below ₱250k Annual Income | Exempt | Individuals earning less than ₱250,000 annually are exempt from personal income tax under the TRAIN Law. |
| 13th Month & Other Benefits | Exempt up to ₱90k | The HEA is lumped into this category. If the sum of all such benefits is below ₱90,000, no tax is withheld. |
| Excess over ₱90k | Taxable | Any amount exceeding the ₱90,000 threshold is subject to the graduated income tax rates. |
4. Obligations of Healthcare Institutions
Public and private hospitals, as withholding agents, are responsible for:
- Computing the Cumulative Benefits: Tracking whether the HEA, when added to the 13th-month pay and other bonuses, breaches the ₱90,000 limit.
- Withholding and Remitting: If the limit is breached, the employer must withhold the appropriate tax and remit it to the BIR.
- Reporting: Including the HEA in the employee’s BIR Form 2316 (Certificate of Compensation Payment/Tax Withheld).
5. Summary and Conclusion
While the Health Emergency Allowance is a "benefit" born out of a crisis, it is not automatically exempt from tax by virtue of its name. Its taxability is governed by the ₱90,000 threshold for bonuses and the ₱250,000 annual income exemption.
For the vast majority of entry-to-mid-level healthcare workers, the HEA effectively remains non-taxable because their total annual benefits rarely exceed the ₱90,000 cap. However, for high-earning clinicians or those receiving substantial performance bonuses, a portion of the HEA may be subject to income tax.
Note: Recipients are encouraged to review their payslips and Year-End Adjustment (YEA) statements to see how their respective HR departments have categorized the HEA.
Would you like me to draft a formal letter of inquiry to an HR department or the BIR regarding the specific withholding calculations for an HEA payment?