Revisiting non taxable employee benefits – de minimis benefits

We are revisiting the employees’ nontaxable portion of compensation, that is, the de minimis benefits.

As provided for in Section 2.79(D)(3)(b) of Revenue Regulations (RR) No. 02-98, as amended, de minimis benefits are facilities or privileges given or offered by an employer to its employees, provided such facilities or privileges 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 its employees.

De minimis benefits are not subject to income tax as well as to withholding tax on compensation income of employees.

This update will give you with the new ceiling amount under Revenue Regulations (RR) 11-2018 (page 21) under the TRAIN law.

1. Monetized unused vacation leave credits of private employees not exceeding 10 days during the year;
2. Medical cash allowance to dependents of employees, not exceeding P1,500 per employee per semester or P250 per month;
3. Rice subsidy of P2,000 or one 50-kg sack of rice per month worth not more than P2,000;
4. Uniforms and clothing allowance not exceeding P6,000 per annum;
5. Actual medical assistance not exceeding P10,000 per annum;
6. Laundry allowance not exceeding P300 per month;
7. Employees’ achievement awards, which must be in the form of tangible personal property other than cash or gift certificates, 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;
8. Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per employee per annum;
9. Daily meal allowance for overtime work and night/graveyard shift not exceeding 25% of the basic minimum wage; and
10. Benefits received by an employee by virtue of a Collective Bargaining Agreement (CBA) and productivity incentive schemes, provided the total annual monetary value received from both CBA and productivity incentive schemes combined do not exceed P10,000 per employee per taxable year.
11. The implementing rules of the TRAIN Law increased certain benefits on the list. The medical cash allowance increased from P750 to P1,500 per semester; the rice subsidy increased from P1,500 to P2,000 per month; and the clothing allowance was increased from P4,000 to P6,000 per annum.

Moreover, the employees’ 13th month and other benefits tax exemption amounts to P90,000.

With the pandemic going on, employers may consider the nontaxable de minimis benefits listed above in lieu of salary increases.