Salary Differential Now Tax-Free Under Expanded Maternity Leave Law

The salary differential under Republic Act No. 11210, otherwise known as “The Expanded Maternity Leave Law” is now tax-free because it is considered a benefit, according to the Bureau of Internal Revenue (BIR). 

BIR’s Revenue Memorandum Circular (RMC) No. 105-2019 clarified that the tax treatment of the salary differential of female workers availing maternity leaves is considered a benefit and shall be exempted from income and withholding taxes. 

Signed by BIR Commissioner Caesar Dulay, the BIR memorandum reads, “The maternity benefit of the female worker has been expanded from the previous 100% of the average daily salary credit to a full pay or salary which now includes the salary differential as its component, aside from the added duration of the maternity leave. Accordingly, it is therefore clear that salary differential is considered a benefit.” 

The same memorandum also states that employers from the private sector shall be responsible for payment of the salary differential between the actual cash benefits received from the SSS by the covered female workers and their average weekly or regular wages, for the duration of the maternity leave.

BIR took into account in the memorandum the provisions of the EML Law and its Implementing Rules and Regulations (IRR) — jointly issued by the Civil Service Commission (CSC), DOLE, and SSS — which prescribe that workers availing of the maternity leave period and benefits must receive their full pay. 

RA No. 11210, or the 105-Day Expanded Maternity Leave Law, was signed into law on February 20, 2019. Its IRR was issued on May 1 of the same year. The law extends the previous 60-day paid maternity leave to 105 days, with an option to extend for an additional 30 days of unpaid leave. Solo mothers are granted an additional 15 days of paid maternity leave.