FRINGE BENEFIT/

DE MINIMIS BENEFITS
AN INTRODUCTION
 FRINGE BENEFIT

Fringe Benefit means any good,

service or other benefits furnished or
granted in cash or in kind by an
employer to an individual employee
(except rank and file)
 RATIONALE OF FRINGE
BENEFIT

To provide incentive to encourage

employee’s productivity and loyalty to
the employer
 Fringe benefits are as follows:
• Housing
• Expense account
• Vehicle of any kind
• Household personnel (maid, driver
and others)
• Interest on loan at less than market
rate to the extent of the difference
between the market rate and actual
rate granted
 Fringe benefits are as follows:
• Membership fees, dues and other
expenses borne by the employer for the
employee in social and athletic clubs or
other similar organisations
• Expenses for foreign travel
• Holiday and vacation expenses
• Educational assistance to employee or his
dependents; and
• Life or health insurance and other non-life
insurance premiums or similar amounts in
excess of what the law allows.
Under the Tax Code, fringe benefits are taxable. As an
RULES ON Fringe benefits
employer, you have to withhold tax for the fringe benefits in
order for it to become deductible from business income in
computing income tax. The following rules apply to fringe
benefits:

1.) Fringe benefits to rank-and-file employees are not

taxable with fringe benefit tax, but instead are taxable as
compensation income subject to normal income tax rate in
Section 24(A) of the NIRC, except for “de minimis benefits”
and benefits provided for the convenience of the employer.

2.) Fringe benefits to managerial and supervisory

employees are taxable with the fringe benefit tax, which is
a final tax except for “de minimis benefits” and benefits
 RULES ON Fringe benefits
• The fringe benefit tax is computed only to those
granted with managerial and supervisory positions.
Other than that, the income is subject to normal
income tax rate.

• Those allowances that are received by an employee

in fixed amounts and regularly received by the
employee as part of his salaries shall not form part of
the taxable fringe benefit but shall be treated as
compensation income.
 RULES ON Fringe benefits
There are fringe benefits that are not taxable as the following:
1. Fringe benefits which are authorised and exempted from tax
under special laws;
2. Contributions of the employer for the benefit of the employee
to retirement, insurance and hospitalisation benefit plans;
3. Benefits given to the rank and file employees, whether
granted under a collective bargaining agreement or not; and
4. De minimis benefits as defined in the rules and regulations to
be promulgated by the Secretary of Finance, upon
recommendation of the Commissioner.
5. If the grant of fringe benefits to the employee is required in
the nature of, or necessary to the trade, business or profession
of the employer;
6.If the grant of the fringe benefit is for the convenience of the
employer.
• fringe
RULES
benefit is aON
final Fringe benefits
tax on employee’s income to
be withheld by the employer. It is the company that
is liable for the fringe benefit tax and not the
employee.

• The tax base of fringe benefits is based on the

grossed-up monetary value (GMV) of the fringe
benefits granted by the employer to the employees
(except those rank-and-file employees)

• The grossed-up monetary value of the fringe benefit

represents the whole amount of income realized by
the employee which includes the net amount of
money or net monetary value of property which has
The taxable amount of the fringe benefit is computed as follows.
This amount will be used as our tax base when computing the
fringe benefit tax.
Monetary value of the fringe benefit (cash payment) 81,250
Divided by the Grossed-Up Monetary Value 65%
Taxable Amount of the Fringe Benefit 125,000

The taxable amount of the fringe benefit tax multiplied by the

applicable tax rate will be our fringe benefit tax.
Taxable Amount of the Fringe Benefit. 125,000
Multiplied by the Fringe Benefit Tax Rate 35%
Fringe Benefit Tax 43,750
The deductible fringe benefit expense for income tax purposes is
the sum of the cash payment and the fringe benefit tax. For
income tax purposes, the total amount of the deductible fringe
benefit expense is a deductible expense from business income.
Cash Payment of the Personal Expenses. 81,250
Plus The Fringe Benefit Tax 43,750
Deductible Fringe Benefit Expense 125,000

In the books of the company upon payment of the fringe benefit

to the employee, the total deductible fringe benefit is debited
to fringe benefit expense and cash is credited to the amount
of payment to the employee and the withholding tax
 DE MINIMIS BENEFIT
• The De Minimis Benefits are benefits of
relatively small value given by the employer to
his or her employees to improve health,
goodwill, contentment, or efficiency of his/her
employees.

• These are not subject to Income Tax as well

as withholding tax on compensation of both
managerial and rank and file employees.
 ADVANTAGES OF DE
MINIMIS BENEFIT

• The Employees will receive Tax Exempt

Compensation

• The Employers can claim the De Minimis

benefits as Salary Expense of their
company.
The following shall be considered as “De Minimis”
DE MINIMIS BENEFIT
Benefits:

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 per employee per
semester or P250 per month.

4. Rice Subsidy of P2,000 or one sack of 50kg. rice per

The following shall be considered as “De Minimis” Benefits:
DE MINIMIS BENEFIT
5. Uniform and Clothing Allowance not exceeding P6,000 per
annum.

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 per annum.

7. Laundry Allowance not exceeding P300 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 annual
monetary value not exceeding P10,000 received by the employee
under established written plan which does not discriminate in favor
 DE MINIMIS BENEFIT
The following shall be considered as “De Minimis” Benefits:

9. Gifts given during Christmas and Major Anniversary

Celebration not exceeding P5,000 per employee per annum.

10. Daily Meal Allowance for Overtime work and

night/graveyard shift not exceeding twenty-five (25%) of the
basic minimum wage on per region basis

All other benefits given by employers which are not included

in the above enumeration shall not be considered as “de
minimis” benefits,

Hence, shall be subject to income tax as well as withholding

tax on compensation income.