Tax-exempt uniform allowance increased

The Bureau of Internal Revenue (BIR) has issued Revenue Regulations No. 8-2012 – “Further amends Revenue Regulations 2-98 and 3-98, as last amended by Revenue Regulations 5-2008 and 5-2011, with Respect to de minimis benefits” or “RR No. 8-12“.

Under RR 8-12, uniform allowance of P4,000 a year had been increased to P5,000 a year effective January 1, 2012. Being a deminis benefits, or provisions to employees of relatively small value for their general welfare, the same is exempted from withholding tax on compensation.

To qualify for tax-exemptions, it is not required that the employer-taxpayer prescribes a particular company-wide uniform. What is required is that the employer-taxpayer actually provides such uniform allowance as a matter of policy. It could be given one-time of P5,000.00 anytime during the taxable year or at a uniform monthly rate  of P416.67 (P5,000 divided by 12 months).

In effecting such de minimis benefits in BIR Form No 1601-C, the total amount of non-taxable de minimis benefits shall be indicated so that the amount of total compensation on the financial statements and on the withholding tax on compensation returns shall tally with its other, or at least reconcilable. Doing so would avoid the issue of under withholding during tax examination.

Reference:

RR No. 8-2012 from BIR website.

Comment:

This increase is of tax-exempt limit on uniform allowance is much welcomed because uniform or clothing is indispensable for an employee’s daily reporting for work amidst the increase in clothing prices. We would likewise invite the attention of the BIR in reviewing other amounts on the enumeration of de minimis benefits under the regulations to provide a more equitable and realistic ceilings. Meantime, lets be grateful for the increase in the uniform allowance.

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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