The Magna Carta for Women (Republic Act No. 9710) is a comprehensive women's human rights law that seeks to eliminate discrimination through the recognition, protection, fulfillment, and promotion of the rights of Filipino women. Among its most significant social legislations is the Special Leave Benefit (SLB) for women who undergo surgery caused by gynecological disorders.
While the labor aspect of this benefit is clear, its tax treatment has historically been a point of contention between employers, employees, and the Bureau of Internal Revenue (BIR).
I. The Nature of the Special Leave Benefit
Section 18 of R.A. No. 9710 provides that a female employee in the public or private sector 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.
Key Requirements for Entitlement:
- Length of Service: At least six (6) months of continuous aggregate employment service for the last twelve (12) months.
- Nature of Ailment: The surgery must be due to a gynecological disorder as certified by a competent physician.
- Procedure: The leave is granted after the employee has undergone surgery.
II. The Core Legal Question: Is it Taxable?
In the Philippine tax system, the general rule under the National Internal Revenue Code (NIRC) is that all income, including compensation for services in whatever form paid, is taxable unless specifically exempted by law.
For years, there was ambiguity regarding whether the SLB should be treated as:
- Taxable Compensation Income: Similar to regular salary.
- Exempt Benefit: Similar to SSS maternity benefits or "de minimis" benefits.
III. The BIR Position and Prevailing Rulings
The Bureau of Internal Revenue has clarified the status of the Special Leave Benefit through specific rulings (notably BIR Ruling No. 008-11 and subsequent circulars).
1. Integration with the "De Minimis" and Other Benefits Cap
The BIR generally views the Special Leave Benefit under the Magna Carta for Women as a form of compensation income. However, its taxability is often mitigated by the following categories:
- Social Security Exemptions: Unlike SSS Sickness or Maternity Benefits (which are explicitly exempt under the NIRC and the Social Security Act), the SLB is paid directly by the employer, not the SSS. Therefore, it does not automatically inherit the SSS tax exemption.
- The PHP 90,000 Threshold: Under the TRAIN Law (R.A. 10963), the ceiling for "Other Benefits" (including 13th-month pay and other productivity incentives) is PHP 90,000. If the SLB, when added to the 13th-month pay and other bonuses, remains below this threshold, it is effectively non-taxable.
2. The Argument for Non-Taxability (The "Exclusion" Theory)
Legal scholars and labor advocates often argue that the SLB should be non-taxable based on Section 32(B)(5) of the NIRC, which excludes "amounts received through Accident or Health Insurance or under Workmen's Compensation Acts, as compensation for personal injuries or sickness."
While the BIR has historically been conservative, the Department of Labor and Employment (DOLE) and the Philippine Commission on Women (PCW) maintain that the "full pay" mandate of the Magna Carta should not be diminished by tax deductions, as it is a health-related social protection benefit.
IV. Summary of Tax Treatment in Practice
| Component | Tax Treatment |
|---|---|
| Basic Salary during Leave | Generally considered part of the "Other Benefits" pool subject to the PHP 90,000 exemption limit. |
| Excess over PHP 90,000 | Any amount exceeding the combined PHP 90,000 threshold (13th month + SLB + bonuses) is subject to regular income tax rates. |
| Mandatory Deductions | The period is still subject to SSS, PhilHealth, and Pag-IBIG contributions, as the employer-employee relationship subsists. |
V. Jurisprudential and Policy Direction
The trend in Philippine law is moving toward the "Social Protection" view. Because the SLB is a statutory requirement aimed at recuperation from surgery, taxing it heavily is seen as contrary to the spirit of R.A. 9710.
However, until the BIR issues a Revenue Memorandum Circular (RMC) explicitly classifying the SLB as a wholly exempt benefit (similar to Maternity Leave under the 105-Day Expanded Maternity Leave Law), employers are generally advised to include the SLB in the computation of the PHP 90,000 tax-exempt ceiling.
Note on the 105-Day Maternity Law (R.A. 11210): It is important to distinguish the SLB from Maternity Leave. The BIR has explicitly ruled that the Salary Differential in maternity leave is exempt from income tax. Many argue this creates a legal precedent for the SLB under the Magna Carta for Women to be treated with similar tax immunity.