Knowing de minimis benefits is key to having an accurate payroll processing. We have discussed in our previous article about some of the things that you are doing wrong in your Philippine payroll process that this is a common mistake. In this article, we will discuss more about this type of employee benefits.
What are de minimis benefits?
BIR Revenue Regulation No. 3 – 1998 (C), defined the term “de minimis benefits” 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, goodwill, contentment, or efficiency of his employees.
These benefits are similar to fringe benefits in the sense that they are additional benefits in addition to basic compensation. However, unlike finge benefits they are totally non taxable. Employers are also not required to give these kind of benefits but they are highly encouraged.
Types of de minimis benefits
- Monetized unused vacation leave credits of employees not exceeding ten (10) days during the year; (RR No. 5-2011).
- Monetized value of vacation and sick leave credits paid to government officials and employees; (RR No. 5-2011)
- Medical cash allowance to dependents of employees, not exceeding P750 per employee per semester or P125 per month; (RR No. 5-2011)
- 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)
- Uniform and Clothing allowance not exceeding P5,000 per annum; (RR No. 8-2012)
- 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)
- Laundry allowance not exceeding P300 per month; (RR No. 5-2011)
- 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)
- Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per employee per annum; (RR No. 5-2011)
- 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)
- 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)
Treatment of de minimis benefits in the Philippine payroll process
Remember that you should include these benefits on your payroll but should be tax exempt. As an employer these benefits are also deductible from your income. Here is an illustration to further explain how to view “de minimis benefits” in payroll processing.
|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 Excess of P82,000.00
Managerial and Supervisory
|Income Tax Rate
Fringe Benefit Tax Rate
|All Other Benefits||Income Tax Rate|
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