What are the authorized “De Minimis Benefits” of government employees?

What are De Minimis Benefits?

“De minimis benefits are benefits of relatively small value provided by the employer to its employees on top of the basic compensation intended for the general welfare of the employees.

Being of relatively small value, the same is not being considered as a taxable compensation. 

This concept has initially been introduced by Revenue Regulation No. 8-2000 sometime in year 2000 amending Revenue Regulations 3-98, and underwent a number of amendments, to include a material impact under Revenue Regulation No. 15-2011 dated March 16, 2011, Revenue Regulation No. 8-2012 dated May 11, 2012, and Regulations No. 1-2015 dated January 5, 2015. As of this writing, the latest amendment is Revenue Regulation No. 11-2018. [1]

Is there a change in the non-taxability of De Minimis Benefits under the TRAIN Law?

None. There is no change in the tax treatment for De Minimis Benefits. It is still considered as compensation not subject to income tax and consequently, not subject to withholding tax, and neither to fringe benefit tax. [2]

What are the benefits classified/considered as De Minimis Benefits? Are there any updates in the amount of De Minimis Benefits?

Beginning January 1, 2018, the following are the authorized De Minimis Benefits: (previous rates are written in italics)

1) Monetized unused vacation leave credits of private employees not exceeding ten (10) days during the year;

2) Monetized value of vacation and sick leave credits paid to government officials and employees;

3) Medical cash allowance to dependents of employees not exceeding P1,500.00 per employee per semester or P250.00 per month; (previously, the rate was P750.00/employee/semester)

4) Rice subsidy of P2,000.00 or one (1) sack of 50 kg. rice per month amounting to not more than P2,000.00; (previously, the rate was P1,500.00/month)

5) Uniform and clothing allowance not exceeding P6,000.00 per annum; (previously, the rate was P5,000.00/annum)

Starting 2024, the uniform or clothing allowance of government employees is ₱7,000.00. As of this writing, the ₱1,000.00 in excess of the ₱6,000.00 de minimis benefits is not yet covered by a Revenue Memorandum exempting the same from withholding tax.

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 not exceeding P300.00 per month;

8) 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 P10,000.00 received by the employee under an established written plan which does not discriminate in favor of highly paid employees;

9) Gifts given during Christmas and major anniversary celebrations 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 incentive schemes provided that the total annual monetary value received from both CBA and productivity incentive schemes combined do not exceed ten thousand pesos (P10,000.00) per employee per taxable year.

What shall be the tax treatment of the authorized De Minimis Benefits given to employees which are beyond the prescribed amount of benefits?

As a general rule, all benefits that are not exempted by law are taxable. Thus, all other benefits given by employers which are not included in the above enumeration shall not be considered as De Minimis Benefits, and hence, shall be subject to income tax as well as withholding tax.

The benefits given in excess of the maximum amount allowed as De Minimis Benefits shall be included as part of the “other benefits” which is subject to the P90,000.00 ceiling. Any amount in excess of the P90,000.00 shall be subject to income tax, and consequently, to the withholding tax on compensation. [2]

A withholding tax, or a retention tax, is an income tax to be paid to the government by the payer of the income rather than by the recipient of the income. The tax is thus withheld or deducted from the income due to the recipient. [3]

Related: TWELVE (12) NON-TAXABLE COMPENSATION INCOME OF GOVERNMENT EMPLOYEES EVERY ACCOUNTANT SHOULD MASTER IN ORDER TO AVOID COMMITTING ERRORS IN THE COMPUTATION OF THE EMPLOYEES’ INCOME TAX

Reference:

1 Tax Accounting Center

2 RMC No. 50-2018

3 Wikipedia