Non Taxable Employee

Benefits DE MINIMIS
Benefits
As an employer, you might give benefits to your
employees apart from their regular salaries and wages.
As we have previously discussed, these are called fringe
benefits. However, there are fringe benefits that are
relatively small in value and are not taxable. These are
called de minimis benefits. According to BIR Revenue
Regulations No. 3-1998(C), the term de minimis
benefits refers to 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.
De minimis benefits, like fringe benefits, are granted by
the employer on top of the employees basic
compensation, but are not considered as taxable
compensation for income tax purposes nor subject to the
fringe benefit tax. Employers are not obliged to give this
kind of benefits but they are encouraged to do so since
these benefits, no matter how small, are a big help to the
workers. The concept of de minimis benefits had been
initially introduced in RR No. 3-1998 and underwent
revisions and amendments which include BIR 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.
WHAT BENEFITS ARE CONSIDERED AS DE
MINIMIS BENEFITS?

For tax purposes, only the benefits considered as de

minimis are considered as tax-exempt. All other benefits
given by the employers which are not included in the
listing of de minimis benefits are not considered as de
minimis, and hence, subject to income tax as well as
withholding tax on compensation income. Below is the list
of the latest de minimis benefits of both managerial
and rank-and-file employees for income tax purposes. All
allowances regularly received by the employees are
subject to income tax, except those that are enumerated
below within the stated ceiling amount.

1. Monetized unused vacation leave credits of

employees not exceeding ten (10) days during the
year; (RR No. 5-2011)
1. 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)

1. 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)
2. Uniform and Clothing allowance not exceeding
P5,000 per annum; (RR No. 8-2012)
3. 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)
4. Laundry allowance not exceeding P300 per month;
(RR No. 5-2011)
5. 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)
6. Gifts given during Christmas and major
anniversary celebrations not exceeding P5,000 per
employee per annum; (RR No. 5-2011)
7. 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)
8. 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)

APPLICATION OF THE DE MINIMIS CONCEPT

An employer who give a monthly rice subsidy to its

employees are allowed only P1,500.00 monthly allowance
per employee to be considered as de minimis as listed
above. If the employer granted more than this amount,
the excess might be included as taxable compensation
income. The limitation stated in the above list are very
important. Any excess on the limit will be taxable and,
therefore, be subjected to the withholding tax. 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 the 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, thats the time it is taxable as
stated above.

To illustrate, the following tax rules may apply to all

income received by an employee:

Salaries & Wages (Basic

Compensation) Income Tax Rate

De Minimis Benefits Exempt

Excess of De Minimis
(Add with 13thMonthPay
and Bonuses =
P82,000.00) Exempt

Benefits & Bonuses in Income Tax Rate

Excess of P82,000.00 Fringe Benefit Tax Rate
Rank-And-File Employee
 Managerial and
Supervisory

All Other Benefits Income Tax Rate

For the employer, the de minimis benefits granted to

the employees are allowed as inclusion in the deductions
to gross income 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.

SUMMARY OF THE RULES

To summarize, 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.
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:

Description Taxable Nontaxable

Annual Basic Salary 250,000

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 Bonuses 82,000 72,000

Excess Rice Subsidy 12,000

Excess Uniform/Clothing 3,000 5,000

Total 255,000 105,000