DE MINIMIS BENEFITS

Mark Alex B. Cadiao, CPA, MBA

 DE MINIMIS BENEFITS

• These are benefits given by the employer to the employees that are relatively
small value in addition to their regular compensation but are not considered as
taxable compensation for income tax purposes nor subject to the fringe benefit
tax. These benefits are intended for the employees to recognize their efforts and
improve worker retention across the organization.
 DE MINIMIS BENEFITS

• These are not subject to income tax and withholding tax on compensation
income of managerial, supervisory and rank-and-file employees, to wit:
• Monetized unused vacation leave credits of private employees not exceeding
10 days during the year;
• Monetized value of vacation and sick leave credits paid to government
officials and employees;
• Medical cash allowance to dependents of employees, not exceeding P1,500
per employee per semester or P250 per month (as amended by RR 11-2018);
 DE MINIMIS BENEFITS

• These are not subject to income tax and withholding tax on compensation
income of managerial, supervisory and rank-and-file employees, to wit:
• Rice subsidy of P2,000 or one sack of 50-kg rice per month amounting to not
more than P2,000 (as amended by RR 11-2018);
• Uniforms and clothing allowance not exceeding P6,000 per annum (as
amended by RR 11-2018)
• Actual medical assistance, e.g., a therapeutic benefit to cover medical and
healthcare needs, annual medial/executive check-up, maternity assistance,
and routine consultations, not exceeding 10,000 per annum;
 DE MINIMIS BENEFITS

• These are not subject to income tax and withholding tax on compensation
income of managerial, supervisory and rank-and-file employees, to wit:
• Laundry allowance not exceeding P300 per month;
• Employees’ achievement awards, which must be in the form of tangible
personal property other than cash or gift certificates, 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;
• Gifts given during Christmas and major anniversary celebrations not
exceeding P5,000 per employee per annum;
 DE MINIMIS BENEFITS

• These are not subject to income tax and withholding tax on compensation
income of managerial, supervisory and rank-and-file employees, to wit:
• Daily meal allowance for overtime work and night/graveyard shift not
exceeding 25% of the basic minimum wage; and
• Benefits received by an employee by virtue of a Collective Bargaining
Agreement (CBA) and productivity incentive schemes, provided the total
annual monetary value received from both CBA and productivity incentive
schemes combined do not exceed P10,000 per employee per taxable year.
 DE MINIMIS BENEFITS

• Any amount of de minimis benefits in excess of the threshold can still be

exempt as “other benefits,” together with the employees’ 13th month pay, but
not to exceed P90,000.
 ILLUSTRATION

• After working for 30 years, Rita retired from employment in December 2018 as an
accountant of Nail Corporation. As a consequence of her retirement due to old age, she
received the following from his employer:
• Monthly Salary (Until December 15) P30,000
• 13th Month Pay 30,000
• Cash gift 5,000
• Retirement Pay 750,000
• Terminal Leave Pay120,000
• Longetivity Pay 30,000
• Rice allowance per month 2,500
• Clothing Allowance 8,000
• Loyalty award 20,000
 SOLUTION

• After working for 30 years, Rita retired from employment in December 2018 as an accountant of Nail
Corporation. As a consequence of her retirement due to old age, she received the following from his employer:

Salary (30,000 x 11.5) P345,000

Other benefits
• 13th Month Pay 30,000
• Cash gift 5,000
• Longetivity Pay 30,000
• Rice allowance (2,500-2000)x12 6,000
• Clothing Allowance (8,000-6,000) 2,000
• Loyalty award 20,000
Total 93,000
Less: Exempted Benefit 90,000 3,000
Taxable Compensation Income 348,000