“De Minimis Benefits”
De minimis benefits or simply minimal benefits are ordinarily privileges given by an employer to his employees. These are usually small amounts in value and are only offered to promote goodwill and good vibes within the company.These are normally 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.
Employers are not obligated to give them but they are encourage to do so since these benefits no matter how small are a big help to workers.
Due to the nature of this income, tax law has exempted it from income taxation but only to certain limits. Meaning, if you are an employee and you receive these kind of benefits, there will be no withholding tax against the money or token that you will receive.
Currently, the full list of de minimis benefits which are not subject to income tax on compensation as well as fringe benefits tax are the ff.:
- Monetized unused vacation leave credits of private employees not exceeding ten (10) days during the year;
- Monetized value of vacation and sick leave credits paid to government officials and employees;
- Medical cash allowance to dependents of employees, not exceeding P750 per employee per semester or P125 per month;
- Rice subsidy of P1,500 of one (1) sack of 50 kg. rice per month amounting to not more that P1,500;
- Uniform and clothing allowance not exceeding P5,000 per annum; (last amended by RR No. 8, 2012)
- Actual medical assistance, e.g. medical allowance to cover medical and heathcare needs, annual medical/executive check-up, maternity assistance, and routine consultations, not exceeding P10,000 per annum;
- Laundry allowance not exceeding P300 per month;
- 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;
- Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per employee per annum;
- 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;
- Benefits received by an employee by virtue of a collective bargaining agreement (CBA) and productivity incentive scheme provided that the total annual monetary value received from both CBA and productivity incentive scheme combined do not exceed ten thousand pesos (P10,000) per employee, per taxable year.
Important Points to Remember:
- Allowances which are fixed in amounts and are regularly received by the employee as part of his monthly compensation income shall not be treated as taxable fringe benefit but as compensation income.
- All other benefits not included in the enumeration shall NOT be considered de minimis benefits.
- The amount of “De Minimis Benefits” shall not be considered in the P82,000 ceiling of “other benefits” excluded from gross income.
- The excess of the De Minimis Benefits over the respective ceilings shall be considered as “other benefits” and the employee receiving it will be subject to tax only on the excess over the P82,000 ceiling.
- The minmum wage earner employee receiving “other benefits” exceeding the P82,000 limit shall be taxable on the “excess benefit.
- Minimum Wage Earner receiving “other income,” e.g. income from trade, business, or practice of profession, except income subject to final tax, and compensation income, are not exempt from income tax on the entire income earned during the taxable year
Revenue Regulations No. 2-98
Revenue Regulations No. 3-98
Revenue Regulations No. 5-2008
Revenue Regulations No. 5-2011
Revenue Regulations No. 8-2012
Revenue Regulations No. 1-2015