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June 21, 2002

BIR RULING NO. 023-02


Secs. 32 & 33
Joaquin Cunanan & Co.
29/F Philamlife Tower
8767 Paseo de Roxas
Makati City
Attention: Ms. Tomasa H. Lipana
Managing Partner
Tax Services
Madam:
This refers to your letter dated April 17, 2001 requesting on behalf of your
client, Sodexho Pass International (Sodexho for brevity), for confirmation of the
following opinions:
1.

That meal and food benefits provided by client companies through


Sodexho meal and food vouchers may be considered tax-exempt
benefits;

2.

That a meal and food allowance of no more than Php100.00 per


day is considered de minimis benefit; and,

3.

That de minimis rice allowance of Php1,000 per month given to the


employees may be aggregated with the meal allowance through
Sodexho meal and food vouchers and shall still be exempt from
both withholding tax on compensation and fringe benefit tax.

It is represented that Sodexho, a foreign corporation organized and existing


under the laws of France, is a service company engaged in operating innovative
systems (the issuance of service vouchers) to manage employee benefits given by
private companies, national government agencies, including universities and colleges,
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government-owned and/or -controlled corporations, and more generally, any other


organization to improve the health, goodwill, contentment or efficiency of their
employees, members or beneficiaries or their dependents; that in the Philippines,
Sodexho proposes to introduce administration of food and rice subsidy benefits given
by Philippine employers to their employees through the following procedures:
1.

Client company transfers to Sodexho the amount allotted for its


employees' annual or monthly meal and food allowance and/or rice
subsidy with instructions on the amount to be allotted per
employee in conformity with a de minimis threshold that would be
established;

2.

Sodexho issues meal and food vouchers (intended for each


employee with the value allotted for the respective employee's
benefit per working day) and delivers the same to the client
company. The face value of the vouchers shall be equivalent to the
amount transferred by the client company to Sodexho;

3.

Client company distributes the vouchers to its employees;

4.

Employee uses these vouchers for meals and/or food at an


accredited establishment (e.g., restaurant/food outlet) of his choice;

5.

Accredited outlet sends back used vouchers to Sodexho for


reimbursement;

6.

Sodexho reimburses the store/outlet.

We reply as follows.
In general, the term "compensation" means all remuneration for services
performed by an employee for his employee under an employer-employee
relationship, unless specifically excluded by the Tax Code of 1997. The name and
basis by which the remuneration for services is designated is immaterial in
determining whether the remuneration constitutes compensation. Thus, fringe
benefits, unless specifically excluded from gross income and unless subject to the
fringe benefits tax under Section 33 of the Tax Code of 1997, would generally
constitute compensation to the recipient. (Sec. 2.78.1(A), Revenue Regulations No.
2-98) Furthermore, any good, service or other benefit furnished or granted in cash or
in kind by an employer to an individual employee, except rank and file employees as
defined, shall generally be understood as fringe benefits, and as such, shall be subject
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to the fringe benefits tax, unless specifically excluded under the Tax Code of 1997, as
implemented according to rules and regulations as are necessary to carry out
efficiently and fairly the provisions of the Code. (Section 33, Tax Code of 1997, as
implemented by Revenue Regulations No. 3-98, as amended.)
De minimis benefits are facilities or privileges furnished or offered by an
employer to his employees that are relatively small value and offered or furnished by
the employer merely as a means of promoting the health, goodwill, contentment, or
efficiency of his employees, and as such, they are subject to neither compensation
income tax nor fringe benefits tax. They are, therefore, not subject to withholding tax
as well. (Sec. 2.78.1(A)(3), Revenue Regulations No. 2-98, as amended by Revenue
Regulations 8-2000; Sec. 2.33.(C), Revenue Regulations No. 3-98, implementing
Section 33(C)(4) of the Tax Code of 1997.)
Accordingly, the amount of de minimis benefits conforming to the maximum
values prescribed for each of the benefits enumerated in Revenue Regulations Nos.
3-98, as amended by Revenue Regulations Nos. 8-2000 and 10-2000 shall not be
considered in determining the Php30,000 threshold of "Other Benefits" provided in
Section 32(B)(7)(c) of the Tax Code of 1997. However, any amount of fringe benefits
paid by the employer that is in excess of the maximum values set in the stated
Regulations shall be considered, along with the "Other Benefits", in determining
whether or not the Php30,000 threshold has been exceeded, and the excess thereof
shall become taxable to the employee receiving the benefits. (Sec. 2.78.1(A)(3),
Revenue Regulations No. 2-98, as amended by Revenue Regulations 8-2000).
On the basis of the foregoing, we proceed to respond to your specific concerns.
1. The meal and food benefits provided by the client-companies to their
employees through Sodexho meal and food vouchers may be considered tax-exempt
benefits.
The meal and food benefits provided to their employees by client companies
through Sodexho meal and food vouchers may be tax-exempt, subject to the standards
set for de minimis thresholds for fringe benefits under Revenue Regulations No. 3-98,
as amended by Revenue Regulations No. 8-2000 and 10-2000, and further, to the
conditions set for the benefits to be exempt pursuant to the tests of convenience of the
employer and the promotion of health, goodwill, contentment, or efficiency of the
employees under Sec. 2-78.1(A)(2) and (3) of Revenue Regulations No. 2-98, as
amended by Revenue Regulations No. 8-2000 and 10-2000. The name and basis upon
which the benefits are to be given are immaterial in determining whether such would
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constitute taxable income. Thus, whether or not the benefits are administered by the
company itself or through Sodexho, as the conduit, would not be the determining
factor; rather, the determination must be made according to the standards laid down in
the implementing Regulations.
Accordingly, the value of the meals provided to an employee in addition to his
remuneration for services rendered, if furnished to such employee for the convenience
of the employer, shall not be added to the remuneration paid for the purpose of
determining the amount of compensation subject to income and withholding tax.
Neither shall facilities or privileges that are of relatively small value constitute
compensation income if these are offered or furnished by the employer merely as a
means of promoting the health, goodwill, contentment, or efficiency of his
employees. (Sec. 2.78.1(A)(2) and (3), Revenue Regulations No. 2-98, as amended)
In the same token, the de minimis benefits which are not subject to fringe
benefits tax refer to those same facilities and privileges furnished or offered by an
employer to his employees that are of relatively small value and are being offered or
furnished by the employer merely as a means of promoting the health, goodwill,
contentment, or efficiency of his employer such as the following:
1.

Monetized unused vacation leave credits of employees not


exceeding ten (10) days during the year and the monetized value of
leave credits paid to government officials and employees, (as
amended by Revenue Regulations Nos. 8-2000 and 10-2000).

2.

Medical cash allowance to dependents of employees not exceeding


Php750.00 per employee per semester or Php125 per month;

3.

Rice subsidy of Php1,000 or one (1) sack of 50-kg rice per month
amounting to not more than Php1,000;

4.

Uniform and clothing allowance not exceeding Php3,000 per


annum;

5.

Actual yearly medical benefits not exceeding Php10,000 per


annum;

6.

Laundry allowance not exceeding Php300 per month;

7.

Employees' achievement awards, e.g., length of service or safety


achievement, which must be in the form of tangible personal

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property other than cash or gift certificate, with an annual


monetary value not exceeding Php10,000 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 Php5,000 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.; and,

10.

Daily meal allowance for overtime work not exceeding twenty-five


percent (25%) of the basic minimum wage.

2. The meal and food allowance, although not for overtime work, is
considered de minimis if it does not exceed 25% of the basic minimum wage.
Revenue Regulations 3-98, as amended by Revenue Regulations 8-2000 and
10-2000 are illustrative and non-exclusive in the enumeration of what constitutes de
minimis fringe benefits. Accordingly, we rule that the meal and food benefits granted
through Sodexho meal and food vouchers, although not intended to be used for
overtime work, may still be added in the above enumeration. However, in terms of de
minimis threshold for regular meal and food benefits, the ceiling for benefits of
similar nature under Revenue Regulations No. 8-2000 should be used as guidelines.
Such being the case, meal and food benefits not exceeding 25% of the daily minimum
wage may be considered de minimis meal benefit and therefore, tax exempt. The
excess over this amount shall be considered other benefits as contemplated under
Section 32(B)(7)(e)(iv) of the Tax Code of 1997. The excess of the meal and food
allowance given over the de minimis ceiling shall still be exempt provided that it,
together with the total amount of other benefits, shall not exceed Php30,000.
3. The rules and regulations on de minimis benefits do not allow
aggregation of the amounts set for each type of benefit.
In keeping with the spirit of the rules and regulations on de minimis benefits,
we rule that there can be no aggregation of the values set for each item of benefit
stated in Revenue Regulations Nos. 2-98 and 3-98, as amended by Revenue
Regulations Nos. 8-2000 and 10-2000. The intent of the Regulations is to treat each
item of de minimis benefits independently of each other, and we have to give life to
that intent. Thus, the Regulations separately provide maximum values for rice
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allowance and for meal allowance. Accordingly, there can be no aggregation of de


minimis values for rice and meal and food benefits through Sodexho meal and food
vouchers. In order to clearly conform with prescribed de minimis standards, therefore,
separate vouchers should be used for the rice allowance and the meal and food
benefit.
This ruling is being issued on the basis of the foregoing facts as represented.
However, if upon investigation, it will be disclosed that the facts are different, then
this ruling shall be considered as null and void.
Very truly yours,
(SGD.) REN G. BAEZ
Commissioner of Internal Revenue

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