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REC(ORDS MG T. DI tsr0
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Quezon City

September 3.2019

REVENTTE MEMORANDTIM CIRCULAR NO. 2"uq

SUBJECT : Clarifies the Proper Tax Treatment of Maternity Leave Benefits Under Reptrblic
Act No. I 12 I 0 Otherwise Known as the " l 05-Day Expanded Maternity Leave Larv"

TO : All Interttal Revenue Officials. Employees and Others Concerned

This Circular is hereby issued in order to clarify the proper tax treatment of salary differential
to be paicl by the employer in favor of f'ernale workers in the private sector, pursuant to the pettitlerlt
provisions o1'Republic Act (RA) No. 11210, otherwise kttorvn as the "l05-day Expanded Nlaternity
Leave Lalv".

The provisions of Sec. 5 (c) of RA No. I l2l0 prescribes, among others that:

"l,Vorker.s avuiling qf the nruterniqt leave period ontl bene.fits musl receitte lheir jirll
pg!. Enrployers.fi"om the privale seclor shall be responsible.for poymenl rtJ'lhe salcu't,
clifferential bebueen the aclual cash benefits received from the 'S.SS 6y the cot,ered
.female v,orkers ctncl their a\;erage weekly or regular v;ages, for lhe duration of lhe
malerni t vu leave, xxx" (uttderscoritlg sLrpplied)

arrcl the pertinent provisionsof Section 2 under the Irnplementing Rules and Regulations (lRI{) of the
said Act jointly issued by the Civil Service Commission (CSC), Department of l,abor and lirnployment
(DOLE) and Social Security Systern (SSS) prescribe that:

"Employed.fernale workers shall receive.full pay v,hich consist.g qf (i) SS,S malernilft
hene-fit contltutecl ba.sed on their $)erage daily salary, creclil nnd (ii) salcn'y clffirentiol
lo he pcticlhy the employer, rf ony;"

Uiiclcr the salnc lRR. the terrn "frril pay" is definecl uncler Section I j. of R.ule II as:

".1. Futl pcty" refers lo crclual remunerotiort ctr ecu'nings paid by eur r,rrrro))er lo a
tt'ttrker.frtr ';ervice'v rendered on norntctl v'orking' tluj's and hours not lctv'ar lhurt
the wage rcde fixed by the Regional Tripcl'lilc LYage.s uncl Procltrctit'il)t Boo'd
(R'l'WPB) inclucling ullov,unce.s prctt,icled.for trncler cri.sting ('otttpany policv ti'
rrt!ltctjvebcu'gctirtitrgag,reentenl,tfunl'' p"ll,tayinlhepuhlic'onllrcctthcrhuttl'
irr,..lude.s tha busic solcny cmd ulloy'ttnces us rttay be provitlecl undar ct:i,slittg
gtritlelirias. "

The SSS issuecl Circuiar No. 2019-009 to All E,mployers and Fernale Members ivith the subjcct.
"Guiclelines op the Payrnent of the Matenrity Benefit Elfective N{arch 11,201? prescribing Sir:ction I
on salury dif-ferential. as lttllor'''s:

"iinplzyers.fr.oru lhe ltrivale seL:t()t'rhall puy, fot'the tlif)'crutce belu,eetr llia f'ull salrr,t'
triitl llrt: ctc:luttl ctsh henefils re ceit't'tl .ft r"tt !ht' \"('\'. i r'.r'"

I-ikervisc. the DOt.t-, issued ils orvn D,rpaftn'lcttt Atlvi:'ii,i)' No. 01 . "Cuiclelitlcs t-'n iir'
('i'rtcria ft'r'
CcrtlltLrtiiiir,ii qf s3lari Difl-erential of Fcrrilil.',1,',.il,els Druing III .'. Iaterrtitl I -lr'c:r'lii i1s
Exemption Pursuant to Republic Act No. 11210 and its Irnplernenting RLrles and Regulations".
prescribing the following introductory provisions under Itern II. Cornputation of Salary' Diff'erential"

"The emplolter shall pq) the salary di/t'erenlial betv,een the .full salar.y o.f'.fenrcrle
v,orker during her maternillt le(tvg and lhe aclual cash bene.fits receit,ed .ft'ont /he
Social Sectu'ilt, Svstem (,S.L9/, -rxr"

On the other hand, Section 2.78.1(BXl)(e) under Revenue Regulations (RR) No. 2-98, as
atlended. presclibes the following remuneration received by an ernployee as an ittcident o1'emplo,vtrertt
that is exempt frorn withholding tax:

"(e) Pqtments rlf henefits made under the Social Securi6, Sltstenr Acl o.f 1951, us
atnendecl:"

Accordingly. for purposes of deterrnining rvhether salalv differential is taxable or not. thele is
a need to resolve whether or not "salary differential" is considered as a benefit uuder tlie SSS Act of
1954. as arnended.

PriortotheserecentlyissuedSSSlaw,Sec. l4-AofRANo.S2S2,whichatnendsRANo. 1161,

otheru,ise knorvn as the Social Security Law issued on June 1 8, 1954. a fenrale urembet' is entitled to a
daily matenrity benefit equivalent to one hundred percent (100%) of her average daily salary credit firr
sixty (60) days or seventy-eight (78) days in case of caesarean delivery. The term "average daily salary
credit" is defined under Sec. 8 of the same larv as the result obtained by dividingthe sum of the six (6)
Itighest rronthly salary credit in the trvelve-month period irnrnediately preceding the semester ol
contingency by one hundred eighry (l 80).

However. based on the cited provisions of the nerv law, the irnplernenting joint IRR and the
respective issuances of SSS and DOLE, the maternity benefit of the female worker has been expanded
fl'orn the previoLrs 100% of the average daily salarl, credit to a full pay ot' salaty rvhich includes nou,the
salary dilferential as its cornponent. aside from the added duration of the maternity leave. Accordingl-v.
it is therefore clearthat salary differential is considered as a beneflt.

Fufther, since the provisions of Section 2.78.1(BX1)(e) under RR No.2-98 do not provide
any qualification in granting tax exemption on payrnents o{'benefits under the SSS larv, the salar-v
differential is exernpt from ittcome and withholding taxes.

All internal revenue officers, employees, and others concerned are hereby enioined to give
this Circular as rvide a publicity as possible.

BI]REAU OF INTERNAL REVII..IUh /*:,*.'^r$,

C,\[SAR R. I)ULAY
Vr')-r:lf[Lmln\ Conrrrrissioner ol- Internal ReveitLtc
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