What are the rules on de minimis benefits in the Philippines, and how did the TRAIN Law change them?
De minimis benefits refer to non-taxable allowances or perks that employers give their employees in the Philippines. Usually, there are of relatively small value or a minimal amount.
To know more about this benefit, here are the answers to some common questions about de minimis benefits:
What is de minimis in the Philippines?
Private employees may receive benefits that are not part of their basic minimum wage. De minimis refers to non-taxable benefits, allowances, or perks given by employers to their employees in the Philippines, which are of relatively small value or a minimal amount. These benefits are generally not subject to income tax, save for a few exemptions.
What are examples of de minimis benefits?
Below is the list of De Minimis benefits employees can receive in 2023 following the updates under Revenue Regulations No. 11-2018:
- Private employees’ leave credits converted to cash (no more than ten days)
- Government officials’ vacation and sick leave credits paid in cash
- Medical cash allowance to dependents (no more than Php 250 per month)
- Rice subsidy (no more than Php 2,000 per month)
- Uniform and clothing allowance (no more than Php 6,000 per year)
- Actual medical assistance, such as maternity assistance and other medical and healthcare needs (no more than Php 10,000 per year)
- Laundry allowance (no more than Php 300 per month)
- Employees’ achievement awards (no more than Php 10,000 in annual monetary value under an established written plan; not favoring highly-paid employees)
- Gifts during Christmas and major anniversary celebrations (must be tangible personal property, no more than Php 500 per year)
- Daily meal allowance for overtime work (no more than 25% of the regional basic minimum wage)
- Benefits under the Collective Bargaining Agreement (CBA) and productivity incentive schemes (combined amount must be no more than Php 10,000 per taxable year)
- Transportation allowance and other benefits not exceeding a certain monetary value
Should any of these items exceed the statutory limits, the rank-and-file employee must pay their individual income tax. Furthermore, employees in supervisory or managerial positions must pay the fringe benefits tax.
How much are de minimis benefits in the Philippines?
De minimis benefits are non-taxable up to a certain monetary limit, which is currently set at PHP 90,000 per year. This means that if the total value of the benefits received by an employee within a year does not exceed PHP 90,000, they will not be subject to income tax.
Is de minimis part of the 13th-month pay?
No, de minimis benefits are not part of the 13th-month pay. The 13th-month pay is a separate benefit mandated by law, which requires employers to pay their employees an additional month’s worth of salary by December 24th of each year.
Is it included in the basic salary?
No, de minimis benefits are not included in the basic salary of an employee. They are separate from the employee’s regular salary and are given as additional perks or allowances.
What is the de minimis limit in the Philippines?
The de minimis limit in the Philippines is currently set at PHP 90,000 per year. This means that if the total value of the de minimis benefits received by an employee within a year does not exceed PHP 90,000, they will not be subject to income tax.
What is the new de minimis benefits rule under the TRAIN Law?
Under the Tax Reform for Acceleration and Inclusion (TRAIN) law, there have been changes to the previous de minimis benefits that employees enjoy. Mostly, it clarifies what items are exempt from income tax and withholding tax.
Starting in 2018, the following changes were made to the de minimis benefits under the TRAIN law:
- The law increased the total annual value of de minimis benefits that employees can receive from Php 82,000 to Php 90,000.
- To include the following under de minimis benefits:
- Rice subsidy cap
- Uniform and clothing allowance
- Actual medical benefits
- Laundry allowance cap
- Employees’ achievement awards or loyalty awards with monetary value
- Rules on the gifts on Christmas and major anniversary celebrations
- TRAIN increased the law tax-exempt threshold for the 13th-month pay and other benefits from Php 82,000 to Php 90,000.
Are these benefits subject to withholding tax?
In the Philippines, de minimis benefits are generally not taxable compensation. In other words, they are not subject to income tax and withholding tax on compensation by default. However, some de minimis items have caps, and the allowable amount of tax exemption for de minimis benefits is Php 90,000.
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