13th Month Pay Tax Exemption Limits in the Philippines

The short answer

Your 13th month pay is tax-exempt up to a combined ceiling of ₱90,000 per calendar year. This isn't a separate exemption just for 13th month pay — it's a shared bucket that also includes your Christmas bonus, mid-year bonus, productivity incentives, and similar cash benefits. If your combined total of all these stays under ₱90,000, none of it is taxed. Only the amount exceeding ₱90,000 becomes taxable.

Where the ₱90,000 figure comes from

The 13th month pay itself is a mandatory benefit created by Presidential Decree No. 851 back in 1975, requiring employers to pay rank-and-file employees an amount equal to one-twelfth of their total basic salary earned during the year. The tax treatment comes from a separate law: the TRAIN Law (Republic Act No. 10963), specifically Section 32(B)(7)(e) of the National Internal Revenue Code. The ₱90,000 ceiling took effect in 2018 and has remained unchanged since, continuing into 2026.

What counts toward the ₱90,000 bucket

• 13th month pay
• Christmas bonus
• Mid-year or performance bonus
• Productivity incentives
• Anniversary gifts and similar cash benefits

What stays separate (not counted here)

• Your regular basic salary
• Overtime pay and night differential
• De minimis benefits within their own separate limits (rice subsidy, uniform allowance, etc.)

How the computation actually works

The 13th month pay formula itself is simple: total basic salary earned during the calendar year, divided by 12. If your salary changed mid-year, or you didn't work the full year, the computation uses your actual total basic salary earned, not a flat monthly rate.

When tax actually applies

Once your total bonuses for the year exceed ₱90,000, only the amount above that threshold is taxed — not the whole bonus. The taxable excess is added to your other taxable income and taxed at your applicable TRAIN Law bracket rate.

In this example, the employee keeps the full ₱90,000 tax-free, and only pays tax on the remaining ₱20,000 — not the entire ₱110,000.

Deadlines and entitlement

• Who's entitled: all rank-and-file employees, regardless of position, including part-time and probationary employees.
• Payment deadline: on or before December 24 each year. Employers may split it — 50% by May 31 and the remaining 50% by December 24.
• Employer reporting: employers must submit a compliance report to DOLE by January 15 of the following year.
• Employees who resign or go AWOL: still legally entitled to a prorated 13th month pay for time actually worked, though employers may deduct unreturned property or damages the employee is responsible for.