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More on 'Bayanihan II'

The implementation of Republic Act No. 11494 or “Bayanihan II” has brought about several welcome exemptions for taxpayers as the country embattles the ongoing pandemic. This particular law was enacted to declare a state of national emergency over the country in an effort to control the spread of the disease and implement Covid-19 response and recovery interventions. The key features that taxpayers may avail of this law are the following below:

On retirement benefits 

Retirement benefits received by employees or officials from private firms, whether individual or corporate, from June 5, 2020 to December 31, 2020 shall be excluded from gross income and consequently, exempt from income tax provided that the employer’s retirement benefit plan is duly registered with the BIR.  

However, if such retiree was rehired by the private firm or any of its related parties within the 12-month period from retirement, this shall be construed as non-retirement. In this case, if the retiree has been rehired within calendar year 2020, the retirement benefit previously received should be reflected in the then-retiree’s annual income tax return under gross income and consequently, should be subjected to the applicable income tax. On the other hand, if the retiree was rehired in calendar year 2021 and still within the 12-month period, the then-retiree should recognize the retirement benefits received in their 2020 annual income tax return and pay the appropriate income tax within 30 days from the date of rehire, or on October 31, 2021 (the deadline of the second installment of 2020 income tax due, without penalties), whichever comes later.  

If the rehired employee does not pay the appropriate income taxes due on the retirement benefits provided, applicable administrative and/or criminal penalties under the Tax Code shall apply.  

On COVID-19 special risk allowances 

Public and private health workers directly catering to or in contact with COVID-19 patients shall likewise enjoy tax exemptions on COVID-19 special risk allowances. The tax exemption on this type of allowance shall be applicable for every month that the said health worker has served during the country’s state of national emergency.  

For this purpose, RR No. 29-2020 has defined public and private health workers as those who are engaged in health and health-related work, and those employed in all hospitals, sanitaria, health infirmaries, health centers, rural health units, barangay health stations, clinics and other health-related establishments, owned and operated by the government or its political subdivisions. This shall also include medical, allied health professionals, administrative and support personnel employed regardless of employment status.  

On actual duty hazard pay paid to human resources for health 

Hazard pay on actual duty paid to human resources for health (HRHs)—those persons temporarily hired to complement or supplement the current bandwidth of the health workforce—shall likewise be excluded from the employee’s gross income and consequently, to income tax.  

On compensation paid to health workers who contracted or died due to COVID-19 

Compensation provided to private and public health workers who have contracted or died due to COVID-19, in the following amounts paid starting February 1, 2020 and during the state of national emergency:  

  • In the case of death, P1,000,000.00;
  • In the case of severe or critical illness, P100,000.00; or, 
  • In the case of mild or moderate sickness, P15,000.00 

shall be excluded from the employee’s gross income and income tax. In case of death, the remuneration paid to the beneficiaries shall be excluded from the deceased’s gross estate and exempted from estate tax.  

The above amounts, however, should be paid to the affected health workers no later than three (3) months after the date of confinement or death and that required supporting documents are submitted by the affected employee or the beneficiaries, whichever the case may be.  

Employer’s responsibilities 

Should the employer already withhold taxes from the retirement benefits, COVID-19 special risk allowances, actual duty hazard pay, or compensation to health workers who contracted or died due to COVID-19, the said employer should refund the taxes withheld from the employees, subject to year-end adjustments of the retiree’s taxable compensation income.  

The income payments mentioned shall be included in the Alphabetical List of Employees. To consolidate this, the employers must submit a one-time listing of recipients of the above income payments on January 15, 2021, which shall include the names and taxpayer identification numbers of the recipients, the nature of income payment, the amount paid, and, the date of payment. This should be attested by an authorized official of the employer and should be submitted to the Revenue District Office or Large Taxpayers Service where the employer is registered.  

In connection to the retirement benefits provided to rehired employees, employers are required to submit a quarterly listing of employees who received retirement benefits and were rehired during the 12-month period. This list is to be submitted by concerned employers within 30 days from the end of every quarter in the calendar year 2021.  

Carl Grengia is an associate of the Tax Compliance and Advisory Division of P&A Grant Thornton Cebu Branch. P&A Grant Thornton is one of the leading audit, tax, advisory and outsourcing firms in the Philippines with 24 partners and more than 900 staff members. We’d like to hear from you! Tweet us: @GrantThorntonPH; “like” us on Facebook: P&A Grant Thornton; and email your comments to or For more information, visit


As published in Mindanao Times, dated 30 November 2020