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 P1,500 per employee per semester or P250 per month; (as amended by RR No. 11-2018)

4. Rice subsidy of P2,000 or one (1) sack of 50 kg. rice per month amounting to not more than P2,000; (as amended by RR No. 11-2018)

5. Uniform and Clothing allowance not exceeding P6,000 per annum; (as amended by RR No. 11-2018)

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 P90,000 (RMC No. 50-2018).  If the excess benefits, bonuses, and the 13th month pay exceeds P90,000 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 P90,000.00 ceiling:

1. The amount included in the list of the "de minimis" shall not be considered as part of the P90,000 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 P90,000 ceiling and will be exempt as long as the total 13th month pay, bonuses and other benefits do not exceed the P90,000 ceiling.  

3. The excess amount of the "de minimis" not absorbed by the P90,000 ceiling shall be subject to the income tax on compensation or the fringe benefit tax.


Illustration: Mr. Alex Dumpa received the following compensation and benefits during the year while working as a bookkeeper.

Annual Basic Salary	P250,000
13th Month Pay and Bonuses	72,000
Rice Subsidy	30,000
Uniform Allowance	8,000

The following is the computation of the taxable and nontaxable compensation income of Mr. Alex Dumpa:

		Taxable	Non-taxable
Annual Basic Salary		250,000
De Minimis Benefits:
Rice Subsidy (2,000 x 12)			24,000
Uniform/Clothing (6,000 per annum)			6,000
Other Benefits:
13th Month Pay and Bonuses	72,000
Excess Rice Subsidy	6,000
Excess Uniform/Clothing	2,000	_______	80,000
Total		250,000	105,000