DE MINIMIS BENEFITS - A BENEFIT WITH NO WITHHOLDING TAX

The economic crisis in the Past years have encouraged poor employees to be concerned about their salaries, more So, about the withholding tax being deducted from them which makes their net pay smaller than what they actually need.

The Bureau of Internal Revenue (BIR) has been very keen on helping the employers in resolving this issue. Benefits like “de minimis” which is tax exempt has been considered.

“ De minimis’ benefits are given to the employees by employers  in the nature of facilities or privileges . It is relatively of small value and are offered in order to promote health, goodwill, contentment, or efficiency of its employees.

‘ De Minimis ‘ benefits are excluded from the gross income when computing the income tax. It is also excluded in the computation of the P30, 0000 ceiling of ‘other benefits’. In In other words it is not taxable being relatively of small value.

The regulations have been introduced in the year 2000 by the Revenue Regulations No. 8 – 2000, underwent several amendments in year 2011 and the latest was in Revenue Regulations No. 8 – 2012 dated May 11, 2012.

‘ De Minimis’ benefits are a deductible salary expense to the employers while to the employees it is an additional salary which has no withholding tax.

Here is the list of the so-called ‘ De Minimis' which are given on top of the employees’ salary.

1. Monetized unused vacation leave credits of employees not exceeding ten days during the year and the monetized value of leave credits paid to government officials and employees

2. Medical cash allowance to dependents of employees not exceeding P750 per employee per semester or P125 Per month.

3. Rice subsidy of P 1,500or one sack of 50-kg. Rice per month amounting to not more than P 1, 500.

4. Uniforms and clothing allowance not exceeding P 4,000 per annum.

5. Actual yearly medical benefits not exceeding P10,000 per annum.

6. Laundry allowance not exceeding P300 per month.

7. Achievement awards like 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.

8. Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per employee per annum.

9. Flowers, fruits, books or similar items given to employees under special circumstances e.g. on account of illness, marriage, birth of  a baby, etc.

10. Daily meal allowance for overtime work not exceeding 25 percent of the basic minimum wage.

Apart from the Above mentioned, employers may add ‘de minimis’ benefits to its employees but needed to study and prove that the said additional benefits other than the listed above , are reasonable and need to define what that additional benefit is all about and for what reason it should be given. In this case, the employer may consider giving de minimis benefits which are not taxable in lieu of the salary increase but employees would be happier if both would be granted.