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What Are The "De Minimis Benefits" That Are Exempt From Income Tax?

According to BIR Revenue Regulations No. 3-1998 (C), the term "De minimis benefits" are facilities or privileges furnished or offered by an employer to his employees that are of relatively small value and are offered or furnished by the employer merely as a means of promoting the health, goodwill, contentment, or efficiency of his employees. These benefits are granted by the employer on top of the employee's basic compensation, and are not being considered as a taxable compensation for income tax purposes. These benefits are  exempt from the fringe benefit tax as well. Employers are not obliged to give them this kind of benefits but they are encourage to do so since these benefits no matter how small are a big help to workers. The concept of de minimis benefits had been initially introduced in RR No.  3-1998 and underwent revisions and amendments which include the Revenue Regulations No. 10-2000, Revenue Regulations No. 5-2008, Revenue Regulations No.  5-2011, Revenue Regulations No. 8-2012 and the latest Revenue Regulations No. 1-2015 dated January 5, 2015.

The following are considered de minimis benefits and are exempt for income tax purposes, hence, not subject to withholding tax on compensation income of both managerial and rank-and-file employees:

1. Monetized unused vacation leave credits of employees not exceeding ten (10) days during the year; (RR No. 5-2011)

2. Monetized value of vacation and sick leave credits paid to government officials and employees;  (RR No. 5-2011)

3.) Medical cash allowance to dependents of employees, not exceeding P750 per employee per semester or P125 per month; (RR No. 5-2011)

4. 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)

5. Uniform and Clothing allowance not exceeding P5,000 per annum; (RR No. 8-2012)

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 P10,000.00 per annum; (RR No. 5-2011)

7. Laundry allowance not exceeding P300 per month; (RR No. 5-2011)

8. 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)

9. Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per employee per annum;  (RR No. 5-2011)

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; (RR No. 5-2011)

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. (RR No 1-2015)

It is stated in RR No. 5-2011, all other benefits given by employers which are not included in the above enumeration shall not be considered as "de minimis" benefits, and hence, shall be subject to income tax as well as withholding tax on compensation income. All allowances regularly received are subject to income tax, except those that are enumerated above within the ceiling amount.

For the employer, the de minimis benefits granted to the employees are included as deductible salaries expense in the computation of income tax.  On the other hand, for an employee, the benefits are considered as additional salary but are exempt from income tax therefore no tax will be withheld on the amount of the benefits.

The limitations stated in the above list are very important. Any excess on the limit will be taxable and, therefore, be subjected to withholding tax on compensation. 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 grossed-up monetary value and 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.

The following rules shall be observed in determining the taxable amount after the "de minimis" and the P82,000.00 ceiling:

1. The amount included in the list of the "de minimis" shall not be considered as part of the P82,000 ceiling of the 13th month pay, bonuses and other benefits that are excluded from gross income in the computation of the taxable income.

2. The excess amount, however, of the "de minimis" benefits can be included as part of the P82,000 ceiling and will be exempt as long as the total 13th month pay, bonuses and other benefits do not exceed the P82,000 ceiling.  

3. The excess amount of the "de minimis" not absorbed by the P82,000 ceiling shall be subject to the income tax on compensation or the fringe benefit tax.

Mr. Alex Dumpa received the following compensation and benefits during the year while working as a bookkeeper.
Annual Basic SalaryP250,000
13th Month Pay and Bonuses72,000
Rice Subsidy30,000
Uniform Allowance8,000

The following is the computation of the taxable and nontaxable compensation income of Mr. Alex Dumpa:
Annual Basic Salary250,000
De Minimis Benefits:
   Rice Subsidy (1,500 x 12)18,000
   Uniform/Clothing (5,000 per annum)5,000
Other Benefits:
   13th Month Pay and Bonuses72,000
   Excess Rice Subsidy12,000
   Excess Uniform/Clothing3,0005,00082,000

Disclaimer : Opinions expressed in this article are that of the author and information provided are for general conceptual guidance for public information only and are not substitute for advice from qualified professional or an expert opinion. Contact support@cpadavao.com for more information and/or if you want to avail professional services from a qualified professional. This site accepts and publishes contributions from accountants and business professionals, especially articles that are of interest to the accountancy profession, in particular, and to the business community, in general. Please email your articles to publisher@cpadavao.com together with your bio and affiliations for publication in this website.

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About Vincent Perdiguez

CPADavao.com is a "business blog" maintained by Mr. Vincent C. Perdiguez. Vincent is an accountant by profession. He is writing about accounting, business and the profession. He is an alumnus of the Mindanao State University - Iligan Institute of Technology (MSU-IIT). He's been working as bookkeeper and internal auditor for small and medium businesses here in Davao City. You can reach him through mobile at 0916-2764-585 (Globe) or by email to vincent.perdiguez@cpadavao.com. Thank you for subscribing to us.
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9 (mga) komento:

  1. Under RR No. 2-1998, the amount of P30,000 refers to the amount of the 13th month pay and other benefits received by an employee as one of the exclusions of the gross income. Under RR No. 3-2015, the amount was increased to P82,000. Accordingly, the amount of P82,000 shall ONLY apply to the 13th month pay and other benefits prescribed under the provisions of Section 2.78.1(B)(11) of RR No. 2-1998, as amended, and shall in no case apply to other compensation received by an employee under an employer-employee relationship such as basic salary and other allowances. Further, it must be emphasized that this exclusion from gross income is not applicable to self-employed individuals and income generated from business.

  2. Yes. Only for the 13th month pay and other benefits. And excess of de minimis happen to qualify as "other benefits" which may be non-taxable if within the new Php82,000 limit.

  3. Can you do selective gain here? That only some employees like the salaried employees with the basis of their annual increase and above average score in the evaluation will be given 1k additional in its basic salary and 1k non taxable allowance under rice subsidy? Thanks

    1. Pwede po yung portion ng salary increase gawing non-taxable allowance under de minimis benefit to lessen tax, bakit hindi? Basta naman hanggang sa umabot sa ceiling, pag exceed nun saka na maging taxable.

  4. If an employee is a rank and file, you can specify the de minimis benefit like 1k rice subsidy. Any excess of the benefits will be subjected to normal income tax. If an employee is managerial or supervisory, you can specify the de minimis benefit like the 1k rice subsidy. Any excess will be subjected to P82,000 ceiling. Then, any excess further be subjected to fringe benefit or normal income tax.

  5. Pertaining to the illustration above,
    if the annual basic pay is 250,000.00 which is raptly estimate asa 20k per month siya, and his/her 13th & bonuses is 72k.. is it possible na ung excess sa deminimis which should be taxable ay iinclude na rin sa 13th month pay & bonuses para hindi taxable??

    1. Pwede po.. yung excess sa de minimis benefit ceiling ay idagdag sa 13th month plus bonuses hanggang sa umabot sa P82,000 ceiling. Pag lampas nun, saka na po sya taxable.

  6. Sir Paano po yung Nalilito ako sa P82,000 na ceiling.
    sa P82,000 including na yung 13th month,bonuses, Diminis allowance?

    Or separate pa si Diminis Allowance sa P82,000?

    1. Hi Dave, kumusta po kayo. Yung "de minimis benefits" ay magkaiba sa P82,000 ceiling. Yung "de minimis benefits" ay yung 11 na kategorya na nakalista sa "de minimis" (tingnan sa taas na original post). Pag mga benefits at allowances na wala sa lista ng "de minimis benefits" (as above) ay considered as "other benefits". Or kaya naman "de minimis benefits" sya ngunit lumagpas na sa limit, yung sobra is considered din as "other benefits". Itong "other benefits" na ito ang syang masasali sa P82,000 ceiling natin. So, 13th month pay plus bonuses plus "other benefits", pag lagpas sa P82,000 yun na ang taxable. So, yun, other benefits ang kasali sa P82,000 ceiling. I hope maliwanag pagka-explain ko. Thanks..