11 Tax Exempt De Minimis Benefits to Employees

De minimis benefits are benefits of relatively small values provided by the employers to the employee on top of the basic compensation intended for the general welfare of the employees. Being of relatively small values, the same is not being considered as a taxable compensation. This concept has initially been introduced by Revenue Regulations No. 8-2000 sometime in year 2000 amending Revenue Regulations 3-98, and underwent a number of amendments, to include a material impact under Revenue Regulations No. 15-2011 dated March 16, 2011, and Revenue Regulations No. 8-2012 dated May 11, 2012. As of this writing, the latest amendment is Revenue Regulations No. 1-2015 dated January 5, 2015.

For the employer, the amount of de minimis provided is a deductible salaries expense, while for the employee, it would constitute as an additional salary that is not deducted withholding tax on compensation. To further appreciate the tax exemptions, let us enumerate the 2015 updated list for guidance and easy reference.

1. Monetized unused vacation leave credits of private employees not exceeding ten (10) days during the year.

2. Monetized value of vacation and sick leave credits paid to government official and employees .

3. Medical cash allowance to dependents of employees, not exceeding P1,500 per employee per semester or P250 per month (as amended by RR 11-2018 on TRAIN RA 10963).

4. Rice subsidy of P2,000 or one (1) sack of rice 50 kilogram rice per month amounting to not more than P2,000 (as amended by RR 11-2018 on TRAIN RA 10963).

5. Uniform and clothing allowance not exceeding P6,000 per annum (as amended by RR 11-2018 on TRAIN RA 10963).

6. 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 per annun.

7. Laundry allowance not exceeding P300 per month.

8. Employees achievement awards, e.g. for length of service or safety achievement, which must be in the form of 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;

9. Gifts made during Christmas and major anniversary celebrations not exceeding P5,000 per employee per annum,

10. 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.

11. 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.

As further provided under Revenue Regulations No. 15-2011 that has become effective starting the year 2011, all other benefits given by employers which are not included in the above enumeration shall not be considered “de minimis benefits, and hence, shall be subject to income tax as well as withholding tax on compensation income. Please note also of the limitations as to amount because it is material to qualify for exemptions. If you provide more than the limitations, the amount in excess of the limit would be taxable and subject to withholding tax on compensation, if the recipient employee is a rank-and-file, or fringe benefits tax (FBT) of 32% if a supervisory or managerial employee. This is however subject to the rule on the P30,000 amount for 13th month pay and other benefits where excess de minimis benefits may not be taxable if the total of such excess plus the 13th month pay and other benefits is within the P30,000 limitation.

Prior to this provision, the previous regulation has a catch all provision for other similar benefits that may be considered as de minimis benefits. As a matter of fact, there was a BIR Ruling on cell phone load allowance as a tax-exempt de minimis benefits. We were expecting that this will become a formal addition to the above list because at present generations, every employee has mobile phones and communications with their respective employers is almost always a must. Unfortunately, with the above new provision, the enumeration has been made exclusive and no other shall be added. We will just wait and see how this will develop in the near future, because who knows the tax authorities might again consider revising the list and making more employee-friendly additions.

References:

• Revenue Regulations No. 15-2011
• Revenue Regulations No. 8-2012
• Revenue Regulations No. 1-2015
• RR No. 11-2018 on TRAIN RA 10963

Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may also please send mail at info(@)taxacctgcenter.ph, or you may post a question at Tax and Accounting Center Forum and participate therein.

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