The Magna Carta for Women (Republic Act No. 9710) serves as a comprehensive bill of rights for Filipino women. One of its most significant employment benefits is the Special Leave Benefit (SLB), which allows women to focus on recovery after undergoing surgery due to gynecological disorders.
However, a common point of confusion for both employers and employees is whether this paid leave is subject to income tax and withholding tax.
1. The Benefit: Section 18 of R.A. 9710
Under the law, a woman employee who has rendered at least six (6) months of continuous aggregate employment service for the last twelve (12) months is entitled to a special leave benefit of two (2) months with full pay based on her gross monthly compensation following surgery caused by gynecological disorders.
Gynecological disorders refer to disorders and diseases unique to the female reproductive system, including (but not limited to) those requiring procedures such as:
- Hysterectomy (removal of the uterus)
- Oophorectomy (removal of ovaries)
- Myomectomy (removal of fibroids)
- Dilation and Curettage (D&C)
2. The Taxability Issue: Is it Exempt?
According to the Bureau of Internal Revenue (BIR), specifically through various rulings (such as BIR Ruling No. 004-12 and subsequent clarifications), the tax treatment of the Special Leave Benefit is as follows:
- Tax Exempt Status: The Special Leave Benefit under the Magna Carta for Women is exempt from income tax and, consequently, from withholding tax on compensation.
- The Logic: The BIR treats this benefit similarly to social security benefits or compensation for injuries or sickness. Since the law mandates "full pay" during a period of medical recovery, taxing the benefit would diminish the "full pay" guarantee intended by the legislature to support the woman during her physical incapacity.
3. Key Differences from Normal Vacation/Sick Leave
It is vital to distinguish the MCW Special Leave from standard company leaves:
| Feature | Standard Sick/Vacation Leave | MCW Special Leave |
|---|---|---|
| Taxability | Taxable (unless monetized within limits) | Tax-Exempt |
| Duration | Usually 5–15 days (company policy) | Up to 2 months |
| Basis | Employment Contract/Labor Code | Republic Act No. 9710 |
| Condition | General illness or personal time | Gynecological surgery recovery |
4. Requirements for Availing the Exemption
To ensure the benefit is processed correctly and remains non-taxable in the payroll records, the following documentation is typically required:
- Medical Certificate: A comprehensive certificate from a competent physician detailing the gynecological disorder and the surgical procedure performed.
- Clinical Summary/Histopathology Report: Documentation from the hospital confirming the surgery.
- Leave Application: A formal application for MCW leave filed within a reasonable timeframe (usually at least 30 days prior to surgery, except in emergency cases).
5. Employer Obligations and Reporting
Employers are mandated to grant this benefit to qualified employees. When filing the BIR Form 1601-C (Monthly Remittance Return of Income Taxes Withheld on Compensation), the amount paid under the Magna Carta Special Leave should be classified under "Non-Taxable/Exempt Compensation."
Note on "Gross Monthly Compensation": The "full pay" includes the basic salary plus standard allowances. Because the law specifies "full pay," the employee should receive the same take-home amount she would have received had she been working, without the deduction of withholding tax on that specific portion of her income.
6. Failure to Comply
Under the Magna Carta for Women, any person, corporation, or entity that violates any provision of the Act (including the denial of the leave or improper reduction of the benefit through unauthorized taxing) may be liable for sanctions, which may include:
- Fines
- Administrative liability
- Potential damages in a labor case filed before the National Labor Relations Commission (NLRC)