De Minimis Benefits Sample Computation for NCR Employees

“De Minimis” benefits (DMB) are exempt from the fringe benefit tax and income tax shall, in general, be limited 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, good- will, contentment, or efficiency.

With the enactment of the TRAIN Law many wonder whether changes have been made on the non-taxability of the DMB under this new statute.

According to the BIR, there is no change in the tax treatment for the DMB. It is still considered as compensation not subject to income tax and consequently, not subject to withholding tax, and neither to fringe benefit tax. (See page 103, Tax Solutions on Employee Compensation and Benefits 2019 Edition citing A3, RMC 50-2018.)

The list was amended and made exclusive by RR 5- 2011. Additional P10,000 annual benefit was added by RR 1-2015. It was further amended by RR 11-2018 increasing the Medical cash allowance to dependents of employees, not exceeding P1,500 per employee per semester, of P250 per month, or P3,000 per annum. Also, rice subsidy of P2,000 or one sack of 50 kg. rice per month amounting to not more than P2,000. Finally, uniform and clothing allowance not exceeding P6,000 per annum.

RMC 50-2018 also confirms the changes. The amended list of DMB as of last amendment by RR 11-2018:

1. Monetized unused vacation leave credits of employees not exceeding ten (10) days during the year;
2. Monetized value of vacation and sick leave cred- its paid to government officials and employees; (See A4, b. RMC 50-2018)
3. Medical cash allowance to dependents of employees not exceeding P1,500 per employee per semester of P250 per month;
4. Rice subsidy of P2,000 per month or one (1) sack of 50 kg. rice per month amounting to not more than P2,000.00 granted by an employer to his employees;
5. Uniform and Clothing allowance not exceeding P6,000.00 per annum;
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.
7. Laundry allowance of P300 per month;
8. Employees achievements awards, e.g. for length of service or safety achievement, which must be 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 which does not discriminate in favor of highly paid employees;
9. Christmas gifts not exceeding P5,000.00 per employee per annum;
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; and
11. Benefits received by an employee by virtue of a collective bargaining agreement (CBA) and productivity incentive3 schemes provided that the total annual monetary value received from both CBA and productivity incentive schemes do not exceed ten thousand pesos (PhP10,000.00) per employee per taxable year.

All other benefits given by employers which are not included in the above enumeration shall not be considered as DMB and hence, shall be subject to income tax as well as withholding tax. (See page 105, Tax Solutions on Employee Compensation and Benefits 2019 Edition, citing A4, RMC 50-2018.)

The amount of “De Minimis” Benefits conforming to the ceiling prescribed shall not be considered in determining the ceiling of “other benefits” (P90,000 per RA 10963) under Section 32(b)(7)(e) of the Code.

Based on the book Tax Solutions on Employee Compensation and Benefits 2019 Edition

Illustration of application of De Minimis and the 13^th Month Pay and Other Benefits:

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Lodi Petmalu received annual clothing allowance amounting to PhP8,000.00. His 13th month pay is PhP83,000.00. There are no other benefits given to him for the entire year.

Thus:

Supplementary income

DMB (clothing allowance)               PhP    8,000.00

Non-taxable Limit Excess                           6,000.00

Excess                                                  PhP    2,000.00

13th month pay                                   PhP 83,000.00

Add: Excess DMB                                         2,000.00

Total 13th Mo. and Other Ben.        PhP 85,000.00

Amount Taxable:                                 PhP        00.00

The amount of PhP85,000.00 is well within the ceiling of PhP90,000.00 for the 13th month pay and other benefits.

Taxable income for compensation earners is the gross compensation income less nontaxable in- come/benefits such as but not limited to the Thirteenth (13th) month pay and other benefits (subject to limitations, see Section 6(G)(e) of these Regulations), de minimis benefits, and employee’s share in the SSS, GSIS, PHIC, Pag-ibig contributions and union dues. (Sec. 3, B, RR 8- 2018)

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