Monday, January 18, 2010

De Minimis Benefits

The BIR exempts de minimis benefits pursuant to Revenue Regulations (RR) No. 3-98, as amended. Examples of de minimis benefits include contributions of the employer for the benefit of the employee to retirement, insurance and hospitalization benefit plans; or certain benefits given to rank and file, whether granted under a collective bargaining agreement or not; or de minimis benefits; or fringe benefits to the employee which is granted is required by the nature of or necessary to the trade, business or profession of the employer; or such grant of the benefit or allowance is for the convenience of the employer.

The BIR sets a limit on the value of tax-exempt de minimis benefits. Under RR 8-00, as amended by RR 10-00, the BIR considers the following as de minimis benefits:

10 days monetized unused vacation leave credits;
medical cash allowance to dependents of employees not exceeding P750 per semester or P125 per month;

actual medical benefits not exceeding P10,000.00;
laundry allowance of P300 per month;
employee achievement awards 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;
flowers, fruits, books or similar items given to employees under special circumstances, e.g. on account of illness, marriage, birth of a baby, etc.; and
daily meal allowance for overtime work not exceeding 25% of the basic minimum wage.

Effective beginning May 10, 2008, (Revenue Regulations No. 5-2008) employees receiving the following benefits from their employers shall enjoy higher tax exemption thresholds:

o Rice allowance - from the current P1,000 per month to P1,500
o Uniform and clothing allowance - from the current P3,000 per year to P4,000

All other benefits not mentioned above shall be not be considered as de minimis benefits and shall be subject to withholding tax on compensation as per  Revenue Regulations No. 5-2011 on March 16, 2011 amending the provisions of Revenue Regulations Nos. 2-98 and 3-98 pertaining to the exemption from income tax from compensation and from fringe benefits tax of de minimis benefits.

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