- March 24, 2016
- Posted by: ryan_admin
- Category: blog
For tax purposes, only the benefits considered as “de minimis” are considered as tax-exempt. All other benefits given by the employers which are not included in the listing of “de minimis benefits” are not considered as “de minimis”, and hence, subject to income tax as well as withholding tax on compensation income. Below is the list of the latest “de minimis benefits” of both managerial and rank-and-file employees for income tax purposes. All allowances regularly received by the employees are subject to income tax, except those that are enumerated below within the stated ceiling amount.
• Monetized unused vacation leave credits of employees not exceeding ten (10) days during the year; (RR No. 5-2011)
• Monetized value of vacation and sick leave credits paid to government officials and employees; (RR No. 5-2011)
• Medical cash allowance to dependents of employees, not exceeding P750 per employee per semester or P125 per month; (RR No. 5-2011)
1. Rice subsidy of P1,500 or one (1) sack of 50 kg. rice per month amounting to not more than P1,500; (RR No. 5-2011)
2. Uniform and Clothing allowance not exceeding P5,000 per annum; (RR No. 8-2012)
3. Actual medical assistance, e.g. medical allowance to cover medical and healthcare needs, annual medical/executive check-up, maternity assistance, and routine consultations, not exceeding P10,000.00 per annum; (RR No. 5-2011)
4. Laundry allowance not exceeding P300 per month; (RR No. 5-2011)
5. Employees achievement awards, e.g., for length of service or safety achievement, which must be in the form of a tangible personal property other than cash or gift certificate, with an annual monetary value not exceeding P10,000 received by the employee under an established written plan which does not discriminate in favor of highly paid employees; (RR No. 5-2011)
6. Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per employee per annum; (RR No. 5-2011)
7. Daily meal allowance for overtime work and night/graveyard shift not exceeding twenty-five percent (25%) of the basic minimum wage on a per region basis; (RR No. 5-2011)
8. Benefits received by an employee by virtue of a collective bargaining agreement (CBA) and productivity incentive schemes provided that the total monetary value received from both CBA and productivity incentive schemes combined do not exceed P10,000.00 per employee per taxable year. (RR No 1-2015)
APPLICATION OF THE “DE MINIMIS” CONCEPT
An employer who give a monthly rice subsidy to its employees are allowed only P 1, 500.00 monthly allowance per employee to be considered as “de minimis” as listed above. If the employer granted more than this amount, the excess might be included as taxable compensation income. The limitation stated in the above list are very important. Any excess on the limit will be taxable and, therefore, be subjected to the withholding tax. It is in the case when the employee is a rank-and-file employee, that the benefits be subjected to the withholding tax and the normal income tax rate. However, if the employee is a managerial or supervisory employee, it will be subjected to the 32% fringe benefit tax. But before you consider it being taxable under normal income tax rate or fringe benefit tax, you have to consider first the 13th month pay, bonuses plus the “excess of the de minimis” benefits received by the employee and compare it to the limit of P82,000 (RR No. 3-2015 dated March 9, 2015). If the excess benefits, bonuses, and the 13th month pay exceeds P82,000 limit, that’s the time it is taxable as stated above.
Joana Cristina Lagrosa, RFC
Director for Operations
Disclaimer: New and subsequent BIR rulings, issuance and/or laws may render the whole or part of the article obsolete or inaccurate. For more information please inquire or consult with the BIR.