De minimis benefits are defined by the Bureau of Internal Revenue (BIR) as “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, contentment or efficiency of his employees…”
The term “relatively small value” differentiates de minimis benefits from fringe benefits. Fringe benefits include employer support to an employee’s major expenses, such as housing and vehicle or foreign travel costs.
De minimis benefits, on the other hand, include minor perks and rewards with a capped value.
Tax-Exempt Benefits
Unlike fringe benefits, however, de minimis benefits are tax-exempt – that is, they are not calculated into the employee’s taxable income.
Provisions governing de minimis benefits are covered in the BIR’s Revenue Regulations No. 3-98, which has seen several amendments since its adoption in 1998.
As of January 2015, below is the BIR’s complete list of de minimis benefits:
- 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 or 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.
Only the benefits listed above are counted as de minimis benefits. All other benefits of similar value may be counted to the employee’s taxable income.
De Minimis Benefits Values
In applying de minimis benefits, it is important to stay within the stated limit for each one. In cases where the benefit amount exceeds the limit, the excess value may go into the employee’s taxable income. However, this could be avoided under Revision RR No. 3-2015 dated March 9, 2015.
Under Revision RR No. 3-2015, if the sum of the employee’s 13th month pay, bonuses and excess de minimis does not exceed P82,000, this is excluded from the computation of the employee’s taxable income. The P82,000 exempt amount is a significant increase from the previous ceiling of P30,000.
Anything in excess of P82,000 goes to the employee’s gross compensation income.
Employers, on the other hand, may include de minimis benefits as a deductible expense in their income tax computation.
Minimum Wage Exemption Philippines
Click the PDF link below to view the Bureau of Internal Revenue regulations on de minimis benefits:
BIR Regulations on De Minimis Benefits