Group Insurance Tax Deductible Expense
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Transcript of Group Insurance Tax Deductible Expense
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W E D N E S D A Y , N O V E M B E R 02 , 2005
‘De Minimis’ and Other Tax-Exempt Fringe Benefits
By Atty. Juris Bernadette M.
Tomboc
I. Introduction
A general concern by employees as
well as employers nowadays due to
the spiraling prices of commodities
is how to legally save on taxes paid
by employees on their
compensation income in order to
increase their take-home pay. This paper summarizes the statutory
provisions, rules and regulations, and some recent illustrative rulings
on ‘de minimis’ and other tax-exempt fringe benefits in order to be
able to assist both employers and employees in choosing and
implementing compensation income tax avoidance strategies.
Section 2.33 (C) of Revenue Regulations No. 3-98 as amended
exempts the following fringe benefits from tax:
(a) Fringe benefits which are authorized and exempted from income
tax under the Code or under any special law;
(b) Contributions of the employer for the benefit of the employee to
retirement, insurance and hospitalization benefit plans;
(c) Benefits given to the rank and file, whether granted under a
collective bargaining agreement or not;
(d) ‘De minimis’ benefits as defined in the Regulations;
(e) If the grant of fringe benefits to the employee is required by the
nature of or necessary to the trade, business or profession of the
employer; or
(f) If the grant of fringe benefits is for the convenience of the
employer.
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II. ‘De Minimis’ Benefits in General
‘De minimis’ benefits that are exempt from the fringe benefits tax
are in general limited to facilities or privileges offered by an employer
which are of relatively small value and are furnished merely as a
means of promoting employee’s health, goodwill, contentment, or
efficiency. (Revenue Regulations No. 10-2000, amending Revenue
Regulations Nos. 2-98 and 3-98, as last amended by Revenue
Regulations No. 8-2000)
The following are classified as ‘de minimis’ benefits under Revenue
Regulations 10-2000 issued by the Bureau of Internal Revenue and
therefore not subject to income tax as well as withholding tax on
compensation income of both managerial and rank and file
employees:
(a) Monetized unused vacation leave credits of private employees not
exceeding ten (10) days during the year and the monetized value of
leave credits paid to government officials and employees;
(b) Medical cash allowance to dependents of employees not exceeding
P750.00 per employee per semester or P125.00 per month;
(c) Rice subsidy of P1,000.00 or one (1) sack of 50-kg. rice per month
amounting to not more than P1,000.00;
(d) Uniform and clothing allowance not exceeding P3,000 per annum;
(e) Actual yearly medical benefits not exceeding P10,000.00 per
annum;
(f) Laundry allowance not exceeding P300.00 per month;
(g) 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;
(h) Gifts during Christmas and major anniversary celebrations not
exceeding P5,000.00 per employee per annum;
(i) Flowers, fruits, books, or similar items given to employees on
special circumstances, e.g., on account of illness, marriage, birth of
baby, etc., and
(j) Daily meal allowances not exceeding twenty five percent (25%) of
the basic minimum wage for overtime work (Revenue Regulations No.
10-2000).
The amount of ‘de minimis’ benefits that are within the above-
enumerated threshold limits prescribed under Revenue Regulations
No. 10-2000 shall not be included in the P30,000.00 ceiling of “other
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benefits’ under Section 32 (B) (7) (e) of Republic Act No. 8424,
otherwise known as the National Internal Revenue Code of 1997 or the
“Tax Code” (Revenue Regulations No. 8-2000, amending Revenue
Regulations Nos. 2-98 and 3-98).
If an employer pays employees more than the threshold limits
prescribed under Revenue Regulations No. 10-2000, the excess shall
still not be taxable to the employee receiving the benefits as long as
they are within the P30,000.00 ceiling on total “other benefits”
received by the employee during the year. Any excess of the foregoing
benefits over the said P30,000.00 ceiling will be taxable to the
employee.
The “other benefits” referred to in Section 32 (B) (7) (e) of the Tax
Code include gross benefits received by employees such as
productivity incentives and Christmas bonus. It likewise includes the
14th month pay, if any, and benefits in excess of the limits prescribed
on ‘de minimis’ benefits under Revenue Regulations No. 10-2000.
The employer may deduct as expense any amount given as benefits to
employees whether classified as de minimis benefits or fringe
benefits (Revenue Regulations No. 8-2000).
III. Some Recent Illustrative Rulings on ‘De Minimis’ and Other
Exempt Fringe Benefits
A. Christmas Cash Gift
A P5,000.00 extra cash gift given to employees during Christmas in
addition to the P5,000.00 basic cash gift also given during Christmas,
or a total of P10,000.00, are ‘de minimis’ fringe benefits and
therefore tax exempt (BIR Ruling No. DA-266-2004 [May 17, 2004]
issued to the Office of the Ombudsman).
However, since the ceiling for gifts given during Christmas and major
anniversary celebrations is fixed at P5,000.00, the excess over the
P5,000.00 ceiling amount of the ‘de minimis’ fringe benefits shall be
considered as “other benefits” under Section 32 (B) (7) (e) (iv) of the
Tax Code (BIR Ruling No. DA-266-2004).
Thus, the excess of the gifts over the ‘de minimis’ ceiling shall still
be exempt provided that it, together with the total amount of other
benefits, shall not exceed P30,000.00 (BIR Ruling No. DA-266-2004).
B. Housing or Living Quarters
Fringe benefits means any good, service or other benefit furnished or
granted by an employer to an employee except rank and file
employees in cash or in kind, in addition to basic salaries, such as
housing.
Section 33 (a) of the Tax Code stipulates that fringe benefits which
are “required by the nature of or necessary to the trade, business or
profession of the employer or when the fringe benefit is for the
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convenience or advantage of the employer” are not subject to the
fringe benefit tax.
If the living quarters are furnished to an employee for the
convenience of the employer, the value thereof need not be included
as part of compensation subject to withholding. Section 2.33 (B) (1)
(g) of Revenue Regulations No. 3-98 implementing Section 33 of the
Tax Code provides:
“(g) A housing unit which is situated inside or adjacent to the
premises of a business/factory shall not be considered as a taxable
fringe benefit. A housing unit is considered adjacent to the premises
of the business if it is located within the maximum of fifty (50)
meters from the perimeter of the business premises.”
If the fringe benefit is for the convenience or advantage of the
employer, it may neither be included as part of compensation income
of the employees subject to withholding nor be subject to the fringe
benefit tax under Section 33 of the Tax Code.
A housing unit shall be considered to be for the convenience or
advantage of the employer if the same is within fifty meters from the
perimeter of the business premises and the employees are required to
be on-call due to the nature of the employer’s business operation.
(BIR Ruling No. DA-635-04 [December 15, 2004] issued to Foreign
Holiday Philippines, Inc. See also BIR Ruling No. DA-241-04 [May 7,
2004] issued to Sohbi Koghei (Phils.), Inc.)
C. Life or Health Insurance
Section 2.33 (B) of Revenue Regulations No. 3-98 implementing
Section 33 (C) of the Tax Code provides that premiums borne by an
employer for its employees’ group insurance shall be considered as
non-taxable fringe benefits, viz.:
“In general, except as otherwise provided under these Regulations,
for purposes of this Section, the term “fringe benefit” means any
good, service or other benefit furnished or granted by an employer in
cash or in kind, in addition to basic salaries, to an individual
employee (except rank and file employees as defined in these
Regulations) such as, but not limited to the following: xxx xxx xxx
(10) Life or health insurance and other non-life insurance premiums or
similar amounts in excess of what the law allows.”
For this purpose, the guidelines for valuation of specific types of
fringe benefits and the determination of the monetary value of the
fringe benefits are given below. xxx xxx xxx
(10) Life or health insurance and other non-life insurance premiums or
similar amounts in excess of what the law allows — The cost of life or
health insurance and other non-life insurance premiums borne by the
employer for his employee shall be treated as taxable fringe benefit,
except the following:
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(a) contributions of the employer for the benefit of the employee,
pursuant to the provisions of existing law, such as under the Social
Security System (SSS), (R.A. No. 8282, as amended) or under the
Government Service Insurance System (GSIS) (R.A. No. 8291), or
similar contributions arising from the provisions of any other existing
law; and
(b) the cost of premiums borne by the employer for the group
insurance of his employees.”
Hence, based on the foregoing, the premiums borne by an employer
under a Grepalife Group Plan for its employees constitute a non-
taxable fringe benefit. (BIR Ruling No. DA-432-2004 [August 11, 2004]
issued to SGV & Co. on behalf of Great Pacific Life Assurance
Corporation citing BIR Ruling No. DA-126-2003 [April 21, 2003]. See
also BIR Ruling No. DA-139-2005 issued to V. C. Mamalateo &
Associates on behalf of Philippine American Life and General
Assurance Company.)
D. Meal and Food Allowance
Meal and food benefits granted through meal and food vouchers,
although not intended to be used for overtime work may be
considered as ‘de minimis’ benefits and therefore exempt from
income tax provided that such meal benefits shall not exceed twenty-
five percent (25%) of the daily minimum wage. (BIR Ruling No. 023-
2002 [June 21, 2002] issued to Sodexho Pass, Inc.)
In rendering such an opinion, the Bureau of Internal Revenue
explained that Revenue Regulations No. 8-2000 and 10-2000 are
merely illustrative and non-exclusive in the enumeration of what are
considered as ‘de minimis’ benefits (BIR Ruling No. 081-03).
Any facility or privilege offered by an employer to his employees that
is of relatively small value and furnished merely as a means of
promoting the health, goodwill, contentment, or efficiency of
employees may be considered as ‘de minimis’ benefits (BIR Ruling No.
081-03).
The meal and food vouchers pass the test of convenience on the part
of the employer and the promotion of the health, goodwill,
contentment, or efficiency of employees. The voucher system
provides documentary support and ensures that the meal or food
allowance given to employees is actually used for purchasing food and
meals (BIR Ruling No. 081-2003).
Meal cash allowances are subject to standards set for ‘de minimis’
thresholds for fringe benefits under Revenue Regulations 3-98 as
amended by Revenue Regulations No. 8-2000 and 10-2000. They are
also subject to the tests of convenience of the employer and
promotion of employees’ health, goodwill, contentment, or efficiency
under Section 2.78.1 (A) (2) and (3) of Revenue Regulations No. 2-98
as amended by Revenue Regulations Nos. 8-2000 and 10-2000 (BIR
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Ruling No. 081-2003).
Meal and food benefits granted, although not to be used for overtime
work may still be added to the enumeration of ‘de minimis’ fringe
benefits. However, in terms of ‘de minimis’ threshold for regular
meal and food benefit the ceiling for benefits of similar nature under
Revenue Regulations No. 8-2000 should be applied. Such being the
case, meal and food benefits not exceeding twenty-five percent (25%)
of the daily minimum wage may be considered a ‘de minimis’ meal
benefit and therefore tax-exempt (BIR Ruling No. DA-205-2005 [April
21, 2005] issued to Capt. Orlando C. Alovera c/o Philippine Coast
Guard citing BIR Ruling No. 23-2002 [June 21, 2002]; BIR Ruling No.
DA-168-2004 [April 5, 2004] issued to Philippines Samsung Electronics
Corporation).
The excess of meal and food allowance given over the ‘de minimis’
ceiling shall still be tax exempt provided that it, together with the
total amount of other benefits, shall not exceed P30,000.00 (BIR
Ruling No. DA-264-2004 issued to Petron Corporation).
E. Medical Benefits
In general, fringe benefits granted to rank and file employees,
including medical benefits, are exempt from the fringe benefits tax
under the Tax Code. (BIR Ruling No. DA-078-2004 citing Section 33
(C) (3) of the Tax Code and BIR Ruling No. 057-1998 [May 21, 1998])
With respect to supervisory and managerial employees, the portion of
medical benefits not exceeding P10,000.00 may be considered as a
‘de minimis’ benefit and therefore tax-exempt. The excess over
P10,000.00 shall be considered as “other benefits” and still be
exempt provided that the total together with the amount of other
benefits shall not exceed P30,000.00 per annum. (BIR Ruling No. DA-
078-2004 [February 20, 2004] citing Section 32 (B) (7) (e) (iv) of the
Tax Code, issued to Lacson & Lacson Insurance Brokers, Inc.)
Thus, actual yearly medical benefits not exceeding P10,000.00 per
annum shall be considered as a ‘de minimis’ benefits not subject to
income tax as well as withholding tax on compensation income of both
managerial and rank and file employees (BIR Ruling No. 081-03 citing
Section 1 (A) (3) (e) of Revenue Regulations No. 10-2000).
Medical benefits provided to employees by companies to be tax-
exempt must likewise comply with the tests of convenience of the
employer and promotion of employees’ health, goodwill, contentment,
or efficiency. (BIR Ruling No. DA-078-04, citing Sec. 2.78.1 (A) (2)
and (3) of Revenue Regulations No. 2-98, as amended by Revenue
Regulations Nos. 8-2000 and 10-2000)
In addition, the following conditions must concur:
(a) The amount given to the employee must be for his own medical
expenses for a given taxable year;
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(b) The amount actually given and actually spent for medical reasons
shall not exceed P10,000.00 in any given calendar year. The term
“actual” connotes something that exists in fact or existing in reality
as distinct or contrasted with something that is potential, possible or
a mere expectancy;
(c) The employee must fully substantiate with official receipts in his
name the medical allowance so granted on or before the annualization
of withholding taxes in any given calendar year (BIR Ruling No. 081-
2003 citing BIR Ruling No. 019-2002 [May 9, 2002]).
F. Perfect Attendance Incentive
A system comprised of monthly perfect attendance incentives of
P200.00 per month from the month of December of the previous year
to November of the year in which the award is given to qualified
employees every December, quarterly perfect attendance incentive of
P600.00 per quarter awarded to qualified employees at the end of
every quarter, and annual perfect attendance incentive of P1,000.00
awarded to employees with perfect attendance for one year from
December of the previous year up to November of the year in which
the award is given to rank and file and supervisory employees may be
considered as a ‘de minimis’ benefit (BIR Ruling No. DA-159-2005
[April 14, 2005] issued to Punongbayan & Araullo on behalf of JAE
Philippines, Inc.).
In BIR Ruling No. DA-159-2005, the above-described perfect
attendance incentive system implemented by JAE Philippines, Inc. was
considered as exempt from the fringe benefits tax since it was
provided for the purpose of promoting employees’ contentment and
efficiency by encouraging them to limit their absences and the values
thereof are relatively small. (BIR Ruling No. DA-159-2005)
Thus, considering that the perfect attendance incentive system is a
‘de minimis’ benefit, it is not subject to income tax as well as to
withholding tax on income of both managerial and rank and file
employees. Further, the said incentives should not be included in the
“other benefits” for purposes of applying the P30,000.00 ceiling under
Section 32 (B) (7) (e) of the Tax Code (BIR Ruling No. DA-159-2005).
G. Performance Incentive
Monthly performance incentives given to rank and file employees are
not subject to the fringe benefits tax if given to rank and file
employees pursuant to Section 2.33 (C) (3) of Revenue Regulations
No. 3-98, as amended. The following were the amounts of monthly
performance incentives in BIR Ruling No. DA-169-2004: P500.00 for
engineers, P350.00 for line leaders, P200.00 for operators, P400.00
for staff, and P250.00 for quality control inspectors. (BIR Ruling No.
DA-169-2004 [April 6, 2004] issued to Mitsuwa Philippines, Inc.)
In addition, monthly perfect attendance incentives in the amount of
P150.00 and annual perfect attendance incentives in the amount of
P2,000.00 for one (1) year, P6,000.00 for two (2) years, and
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P15,000.00 for three (3) years given to rank and file employees were
also considered as exempt from the fringe benefits tax pursuant to
Section 2.33 (C) (3) of Revenue Regulations No. 3-98 as amended.
(BIR Ruling No. DA-169-2004)
The above-described performance and monthly and annual perfect
attendance incentives given to supervisory and managerial employees
were considered as ‘de minimis’ benefits since they are of relatively
small value and offered by the employer merely as a means of
promoting its employees’ health, goodwill, contentment, or
efficiency. Consequently, they were exempted from the fringe
benefits tax (BIR Ruling No. DA-169-2004).
H. Productivity Incentive Bonus
The productivity incentive bonus granted by Lufthansa Technik
Philippines, Inc. (“LTP”) to all its employees to encourage them to
achieve certain targets set by LTP in order to avoid payment of
penalties to customers was considered as “other benefits” under
Section 32 (B) (7) (e) of the Tax Code. As such, they need not form
part of the employees’ taxable income subject to withholding tax on
wages under Section 79 in relation to Section 24 (A) both of the Tax
Code. However, such “other benefits” inclusive of the said
productivity incentive bonus should not, in the aggregate, exceed
P30,000.00 when added to the 13th month pay (BIR Ruling No. DA-
026-2005 [January 21, 2005] issued to Lufthansa Technik Philippines,
Inc.).
Under the service contract agreement between LTP and its customers,
in case LTP incurs a delay in the delivery of services due to its own
fault, LTP shall pay the corresponding penalty. The bonus is given to
LTP employees subject to the following conditions: (1) achievement of
98 percent maintenance original dispatch reliability and (2) zero
technical incidents per week. That –
“Dispatch reliability means the percentage flights which depart
without incurring a delay or cancellation (both technically originated).
Technical incidents shall mean the following: (1) any new maintenance
overrun including AD/CN; (2) any damage to aircraft, engine,
components, or unsafe/non-airworthy condition thereof caused by
faulty workmanship and/or non-compliance with standard
practices/technical procedures and/or company procedures; (3) any
finding of faulty workmanship and/or non-compliance with standard
procedures that, if undetected, could have resulted in damage of an
aircraft, engine, components, or an unsafe/no-airworthy condition
thereof; and (4) any case of incompletely and/or improperly
accomplished release-to-service documentation. That the
performance is measured on a weekly basis xxx” (BIR Ruling No. DA-
026-2005)
Once the above-described two conditions are met, LTP employees will
be entitled to a performance bonus based on their job grade
classification: (1) job grades A to D – P350.00 per week; and (2) job
grades E to E – P700.00 per week (BIR Ruling No. DA-026-2005).
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Under Section 32 (B) (7) (e) (iv) of the Tax Code, “other benefits”
include all benefits other than the 13th month pay such as the annual
Christmas bonus given by private offices, 14th month pay, mid-year
productivity incentive bonus, gift in cash or in kind and other similar
benefits received by an employee in one calendar year, the total
amount of which including the 13th month pay is subject to the ceiling
of P30,000.00 (BIR Ruling No. DA-026-2005).
I. Rice Subsidy
Rice allowance benefit in the amount of P1,000.00 per month is within
the limitation set by Revenue Regulations No. 3-98 as amended by
Revenue Regulations Nos. 8-2000 and 10-2000. Accordingly, rice
allowance in the amount of P1,000.00 per month is neither subject to
income tax nor to the fringe benefit tax. (BIR Ruling No. DA-168-
2004)
In keeping with the spirit of the rules and regulations on ‘de minimis’
benefits, 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’ benefit
independently of each other. Thus, the Regulations separately provide
maximum values for rice allowance and for meal allowance and there
can be no aggregation of ‘de minimis’ values for rice and meal and
food benefits (BIR Ruling No. DA-168-2004, April 5, 2004, citing BIR
Ruling No. 23-2002 [June 21, 2002]).
J. Subsistence Allowance
In BIR Ruling No. DA-163-98 [April 12, 1998] the Bureau of Internal
Revenue considered the subsistence allowance in the amount of
P80.00 per day or P2,400.00 per month furnished by Yazaki-Torres
Manufacturing, Inc. to its employees in order to promote the latter’s
health, goodwill, contentment and efficiency as a ‘de minimis’ benefit
considering further that the same was of relatively small value.
Accordingly, the benefit was not subjected to the withholding tax
prescribed in Section 79 in relation to Section 24 both of the Tax Code
as implemented by Revenue Regulations No. 2-98 (BIR Ruling No. DA-
163-98 [April 22, 1998] issued to Yazaki-Torres Manufacturing, Inc.).
In the above-cited Ruling it was represented that the company’s main
office and place of production is in Calamba, Laguna. The company
maintained a Manila Liaison Office to facilitate communication and
dealing with government and private offices in Manila. Most of the
company’s employees assigned to its Manila Liaison Office were
coming from Laguna and Batangas. The company granted a daily
subsistence allowance in the amount of P80.00 to compensate its
employees for the additional expense in their daily subsistence (BIR
Ruling No. DA-320-99).
Facilities and privileges offered by employers to employees generally
will not be considered as income subject to withholding if the same
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are of relatively small value and furnished merely as a means of
promoting the health, goodwill, contentment, or efficiency of
employees. These facilities or privileges include entertainment,
medical service or so-called “courtesy” discounts on purchases (BIR
Ruling No. DA-320-99).
K. Transportation and Representation Allowances
In general, transportation and representation allowances that are
fixed in amount and regularly received by employees as part of their
monthly compensation income will be considered as taxable
compensation income subject to tax imposed under Section 24 of the
Tax Code (BIR Ruling No. 168-2004).
However, any amount paid specifically, either as advances or
reimbursements for traveling, representation and other bona fide
ordinary and necessary expenses incurred or reasonably expected to
be incurred by an employee in the performance of his duties may not
be considered as compensation subject to withholding, if the following
conditions are satisfied:
(a) It is for ordinary and necessary traveling and representation or
entertainment expenses paid or incurred by the employee in the
pursuit of the employer’s trade, business or profession; and
(b) The employee is required to account or liquidate for the same in
accordance with the specific requirements of substantiation for each
category of expenses pursuant to Section 34 of the Tax Code. The
excess of advances made over actual expenses shall constitute
taxable income if such amount is not returned to the employer.
However, reasonable amounts of reimbursements or advances for
traveling and entertainment expenses which are pre-computed on a
daily basis and paid to an employee while he or she is on an
assignment or duty are not subject to substantiation and withholding
(Revenue Regulations 8-2000).
Thus, pre-computed transportation allowance in the amount of two
thousand pesos (P2,000.00) per month or around ninety-one pesos
(P91.00) per day given to customer service representatives of
Philippine Long Distance Company subsidiaries, Parlance and
Vocative, while on duty, and three thousand pesos (P3,000.00) or
around one hundred thirty six pesos (P136.00) per day for coaches
were not considered as compensation subject to income tax and
consequently to withholding tax on wages in accordance with Revenue
Regulations No. 2-98, as amended (BIR Ruling No. DA-335-2004 [June
25, 2004] issued to Philippine Long Distance Company).
Moreover, since the transportation allowance is pre-computed on a
daily basis and are paid to the employee while on assignment or duty,
the said transportation allowance was not subjected to the
requirements of substantiation and to withholding pursuant to
Revenue Regulations No. 2-98, as amended.
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L. Uniforms and Clothing Allowance
Uniforms and clothing allowance not exceeding P3,000.00 per annum
may be considered tax-exempt benefits. Any excess over the
P3,000.00 limit prescribed under the Regulations shall be added to the
“other benefits” under Section 32 (B) (7) (e) of the Tax Code for
purposes of determining whether or not the P30,000.00 threshold has
been exceeded. The excess over P30,000.00 shall be taxable to the
employee receiving the benefits. (BIR Ruling No. DA-264-2004)
IV. Conclusion
Facilities and privileges that are considered as ‘de minimis’ under
pertinent rules and regulations and/or BIR rulings are excluded from
employees’ taxable gross compensation income. Further, they are
also excluded from “other benefits’ subject to the P30,000.00 limit on
the total amount thereof and are thus exempt from income tax under
Section 32 (B) (7) (e) of the Tax Code Further, ‘de minimis’ benefits
are not subject to withholding tax on compensation in view or their
tax exemption (BIR Ruling No. 168-2004).
Revenue Regulations No. 8-2000 and 10-2000 are merely illustrative
and non-exclusive in the enumeration of what are considered as ‘de
minimis’ benefits (BIR Ruling No. 081-03). Thus the Bureau of Internal
allowed ‘de minimis’ amounts of meal and food allowance not for
overtime work, perfect attendance and performance incentives, and
subsistence allowance as tax-exempt benefits although they are not
included in the enumeration under the Regulations.
In keeping with the spirit of the rules and regulations on ‘de minimis’
benefits, there can be no aggregation of the values for each item of
benefit pursuant to 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’ benefit
independently of each other (BIR Ruling No. 168-2004).
Gross benefits granted to rank and file, supervisory or managerial
employees including the 13th month pay up to the extent of the
threshold of P30,000.00 mandated by Section 32 (B) (7) (e) of the Tax
Code are also excluded from gross income and therefore tax-exempt.
Benefits received by employees in excess of the said threshold of
P30,000.00 are considered as taxable income (BIR Ruling No. 168-
2004).
The “other benefits” referred to in Section 32 (B) (7) (e) of the Tax
Code include the 13th month pay, Christmas bonus, 14th month pay,
gifts in cash or in kind, other similar benefits, and benefits in excess
of the limits prescribed for each item under Revenue Regulations Nos.
2-98 and 3-98 as amended by Revenue Regulations Nos. 8-2000 and
10-2000.
V. Bibliography
A. Statute
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Republic Act No. 8424 [1997] otherwise known as the National Internal
Revenue Code of 1997 or the Tax Code
B. Revenue Regulations
Revenue Regulations No. 10-2000 [December 14, 2000] amending
Revenue Regulations Nos. 2-98 and 3-98, as last amended by Revenue
Regulations 8-2000.
Revenue Regulations No. 8-2000 [August 21, 2000] amending Revenue
Regulations Nos. 2-98 and 3-98.
Revenue Regulations 3-98 [May 21, 1998, effective starting January
1, 1998]. Implementing Section 33 of Republic Act No. 8424 Relative
to the Special Treatment of Fringe Benefits.
Revenue Regulations 2-98 [April 17, 1998]. Implementing Republic Act
No. 8424 Relative to the Withholding on Income Subject to the
Expanded Withholding Tax and Final Withholding Tax, Withholding of
Income Tax on Compensation, Withholding of Creditable Value-Added
Tax and Other Percentage Taxes.
C. BIR Rulings
No. DA-205-2005 [April 21, 2005] issued to Capt. Orlando C. Alovera
c/o Philippine Coast Guard
No. DA-159-2005 [April 14, 2005] issued to Punongbayan & Araullo
No. DA-139-2005 [April 11, 2005] issued to V. C. Mamalateo &
Associates on behalf of Philippine American Life and General
Assurance Company
No. DA-026-2005 [January 21, 2005] issued to Lufthansa Technik
Philippines, Inc.
No. DA-635-04 [December 15, 2004] issued to Foreign Holiday
Philippines, Inc.
No. DA-432-2004 [August 11, 2004] issued to SGV & Co. on behalf of
Great Pacific Life Assurance Corporation
No. DA-335-2004 [June 25, 2004] issued to Philippine Long Distance
Company
No. DA-266-2004 [May 17, 2004] issued to the Office of the
Ombudsman
No. DA-241-04 [May 7, 2004] issued to Sohbi Koghei (Phils.), Inc.
No. DA-264-2004 issued to Petron Corporation
No. DA-169-2004 [April 6, 2004] issued to Mitsuwa Philippines, Inc.
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No. DA-168-2004 [April 5, 2004] issued to Philippines Samsung
Electronics Corporation
No. DA-078-2004 [February 20, 2004] issued to Lacson & Lacson
Insurance Brokers, Inc.
No. 081-2003 issued to Sodexho Pass, Inc.
No. 023-2002 issued to Sodexho Pass, Inc.
No. DA-163-98 [April 22, 1998] issued to Yazaki-Torres
Manufacturing, Inc.