The Magna Carta for Women (Republic Act No. 9710) serves as the comprehensive bill of rights for Filipino women. One of its most significant employment provisions is the Special Leave Benefit (SLB), which allows women to recover from surgery necessitated by gynecological disorders. While the entitlement itself is clear-cut, the question of whether this benefit is subject to withholding tax often arises in payroll and legal compliance.
1. Scope of the Special Leave Benefit
Under Section 18 of RA 9710 and its Implementing Rules and Regulations (IRR), any female employee in the public or private sector is entitled to a special leave benefit of up to two (2) months with full pay based on her gross monthly compensation following surgery caused by gynecological disorders.
Eligibility Requirements:
- Service Requirement: At least six (6) months of continuous aggregate employment service for the last twelve (12) months.
- Medical Necessity: Performance of a surgical procedure due to gynecological disorders (e.g., hysterectomy, ovariectomy, myomectomy, or treatment for endometriosis, cervical polyps, etc.).
- Certification: Proper medical certificate or clinical summary.
2. The Tax Exemption Status
The Bureau of Internal Revenue (BIR) has clarified the tax treatment of the SLB through various rulings, most notably BIR Ruling No. 004-12.
According to the BIR, the Special Leave Benefit under the Magna Carta for Women is exempt from income tax and, consequently, from withholding tax.
Legal Basis for Exemption:
- Social Legislation: The SLB is treated similarly to social security benefits (like SSS or GSIS sickness benefits). Since the benefit is mandated by a social legislation intended to provide relief and protection to women, the payments are not considered "compensation for services rendered" in the traditional sense, but rather a protective benefit.
- Nature of the Benefit: The BIR has ruled that because the law specifies the employee is entitled to "full pay," imposing a tax on that benefit would effectively grant the employee less than what the law mandates, thereby defeating the purpose of the Magna Carta.
- Exclusion from Gross Income: Under the National Internal Revenue Code (NIRC), as amended, certain items are excluded from gross income. The BIR aligns the SLB with these exclusions, categorizing it as a benefit received under a social mandate.
3. Comparison with Other Leave Benefits
It is critical to distinguish the SLB from other common leave types to avoid tax compliance errors:
| Leave Type | Tax Treatment |
|---|---|
| Special Leave Benefit (RA 9710) | Tax-Exempt. Not subject to withholding tax regardless of the amount. |
| Vacation/Sick Leave (Private) | Taxable. Generally considered part of gross compensation unless they fall under "De Minimis" thresholds (for VL) or are part of the PHP 90,000 bonus/benefit cap. |
| Monetized Leave Credits | Exempt up to 10 days. Excess is taxable (for private sector). Public sector monetization is generally exempt. |
4. Administrative Requirements for Employers
To justify the non-withholding of taxes on these payments, employers must ensure proper documentation is maintained for audit purposes:
- Medical Certificate: Issued by an accredited physician, detailing the gynecological disorder and the surgical procedure performed.
- Leave Application: A formal application for the SLB filed within a reasonable timeframe (usually at least 5 days prior to the surgery, or as soon as possible in emergency cases).
- Proof of Service: Records showing the employee has met the 6-month tenure requirement.
5. Summary of Legal Standing
The Special Leave Benefit for Women is a statutory right, not a discretionary bonus. Based on existing BIR interpretations of RA 9710, the "full pay" mandated by the law should be received by the employee in its entirety. Therefore, the employer should not deduct withholding tax from the salary corresponding to the period the employee was on Special Leave under the Magna Carta for Women.
Failure to grant the benefit or the illegal deduction of taxes from such benefit may expose the employer to administrative penalties and charges of discrimination under the Magna Carta for Women.