In the wake of the COVID-19 pandemic, the Philippine government enacted Republic Act No. 11712, also known as the "Public Health Emergency Benefits and Allowances for Health Care Workers Act." Central to this legislation is the Health Emergency Allowance (HEA)—formerly referred to as the One COVID-19 Allowance (OCA)—designed to provide financial recognition to health workers based on their risk exposure levels.

However, a recurring point of contention for both public and private medical institutions involves the fiscal nature of these funds: Is the HEA a tax-exempt benefit or a piece of taxable compensation?

The Nature of the HEA under RA 11712

Under RA 11712, all healthcare workers (HCWs) and non-healthcare workers (non-HCWs) in hospitals, health facilities, and laboratories are entitled to the HEA for every month of service during a declared state of public health emergency. The amounts are tiered based on risk:

Low Risk: ₱3,000 per month
Medium Risk: ₱6,000 per month
High Risk: ₱9,000 per month

While the law explicitly mandates the provision of these benefits, it did not initially provide an absolute, blanket tax exemption for the allowance itself, unlike the specific exemptions granted to "Hazard Pay" or "Sickness and Death Benefits" under previous Bayanihan laws.

The Bureau of Internal Revenue (BIR) Position

According to the prevailing interpretations by the Bureau of Internal Revenue (BIR), specifically through various Revenue Memorandum Circulars (RMCs) and rulings, the taxability of the HEA is generally determined by its classification as compensation income.

1. General Rule: Taxable Income

The BIR maintains that unless a law specifically states that a benefit is "tax-exempt," it falls under the broad definition of "gross income" as defined in Section 32(A) of the National Internal Revenue Code (NIRC). Since RA 11712 does not contain an express provision exempting the HEA from income tax, it is technically considered part of the employee's taxable compensation.

2. Comparison with Bayanihan Act Exemptions

Under the earlier Bayanihan to Heal as One Act (RA 11469) and Bayanihan to Recover as One Act (RA 11494), specific COVID-19 incentives were declared tax-exempt. However, those exemptions were tied to the duration of those specific laws. Because the HEA is governed by RA 11712, the BIR's default stance is that the exemption did not automatically carry over in the absence of new, explicit exempting language.

Exceptions and Mitigating Factors

While the HEA is technically taxable, many healthcare workers may still receive the full amount without deductions due to existing thresholds in the Tax Code:

The ₱250,000 Annual Threshold: Under the TRAIN Law, individuals with a total annual taxable income not exceeding ₱250,000 are exempt from personal income tax. For many entry-level workers or those in lower salary grades, the addition of the HEA may not push them over this limit.
De Minimis Benefits: If any portion of the allowance can be categorized under De Minimis benefits (small value items for the health or goodwill of the employee), that portion may be exempt. However, the HEA’s fixed monthly cash nature makes it difficult to fit into standard De Minimis categories.
13th Month and Other Benefits (₱90,000 Limit): Under Section 32(B)(7)(e) of the NIRC, the total of "13th-month pay and other benefits" is exempt up to ₱90,000. If the HEA is categorized under "other benefits," it remains tax-free as long as the cumulative sum of the worker’s bonuses and such benefits for the year does not exceed the ₱90,000 ceiling.

Administrative Complications

The Department of Health (DOH) has occasionally issued guidelines suggesting that the HEA should be received "in full." This created a legal gray area where the DOH’s administrative intent (full disbursement) clashed with the BIR’s statutory mandate (tax collection).

In practice, many public sector hospitals have disbursed the HEA without withholding tax, citing the "emergency" and "compensatory" nature of the fund. Conversely, many private hospitals, wary of BIR audits and deficiency assessments, have opted to withhold taxes on the allowance to remain compliant with the NIRC.

Summary of Legal Standing

The taxability of the Health Emergency Allowance remains a sensitive issue. Legally, the absence of an explicit exemption clause in RA 11712 subjects the HEA to the general rules of the NIRC.

For the Employee: The allowance is likely taxable if their total annual income (including HEA) exceeds ₱250,000, or if their "other benefits" exceed the ₱90,000 threshold.
For the Employer: There is a statutory obligation to withhold taxes if the payment is deemed compensation, unless the worker provides proof of falling below the tax-exempt thresholds.

Until a clear legislative amendment is passed or a definitive Supreme Court ruling clarifies the "extraordinary" status of the HEA as a non-taxable benefit, the BIR’s conservative interpretation—treating it as taxable compensation—remains the prevailing legal standard.