De Minimis Benefits under the NIRC

Disclaimer: The article that follow is my personal opinion, intended for discussion purposes only. It should not be construed as official opinion or regulation by any governmental agency that has authority over the matter.

Found this in my inbox:

Remy:
Can you help me understand what is the maximum amount of de minimis that could be extended to employees? What are other tax deductions can an employee have?
Thanks.

The National Internal Revenue Code of 1997 only mentions of De Minimis Benefits as one of the fringe benefits that are not taxable (Section 33.C). No definition whatsoever. As such, no explicit amount was provided for in the law.

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Generally, benefits in kind are taxable. However, de minimis benefits, i.e. those of relatively small value and offered or furnished as a means of promoting the health, goodwill, contentment and efficiency of an employee, and those furnished for the convenience of the employer, are exempt.

For how much is that “relatively small value” is judgemental, and any quantifiable amounts are usually included in the P30,000 ceiling for the thirteenth month as exclusion from the gross income.

As regards your second question, I would like to assume you are referring to tax deductions on income derived from an employer-employee relationship. In that case, you can only claim the personal exemption allowed based on your status (single, head of family, married, plus dependents), which is the subject of the amendments contained in RA 9504. Nothing more, nothing less. Why, are you looking for more?

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44 thoughts on “De Minimis Benefits under the NIRC

  1. i just want to ask if the “de minimis benefits” are inclusive of the 30,000.00 ceiling of the the 13th month? Like for instance if you’re basic pay is 15,000.00, you can have a de minimis of 15,000.00?

    • I don’t think it’s de minimis anymore. Please refer to the IRR or RA 9504 as to the meaning of de minimis benefit. Also it’s stated there that the de minimis benefit should not form part of the 30,000 exemption/ceiling.

    • With regards to wayeth query. we also raised that kind of question in our review school b4. our professor answered us that the P30K is deductible whether your 13th month pay is higher or below 30k. In his computation it seems like the same treatment with the additional exemption-deductible on the gross taxable income.

      • @vchloe, that is not accurate. The 30K is deductible only upto the extent of the 13th month pay plus any other benefits (except de minimis) assuming the 13th month pay itself has not exceeded 30K yet. And I’m sure about that.

  2. If that benefit is quantifiable and at as such amount (i.e., P15,000 for the whole year), why would you still cover the benefit as “de minimis”. Declare it as an ordinary employee benefit, it should not still be taxable for as long as the total with the 13th month does not exceed P30,000.

    Calling it as “de minimis” invites a question from the BIR.

  3. is the de minimis excluded in the computation of 13th month? Say my basic is P15,000 plus P2,500.00 de minimis per month,. How much will be my 13th month? is it P17,500 or P15,000l?

    Thanks.

  4. Hi Neci,

    This will serve as an update to my earlier post.

    According to the Implementing Rules and Regulations of RA 9504, under Section 1, it explicitly defines the meaning and application of de minimis benefits, excerpt as follows:

    The amount of ‘de minimis’ benefits conforming to the ceiling herein
    prescribed shall not be considered in determining the P30,000.00 ceiling of ‘other
    benefits’ excluded from gross income under Section 32(b)(7)(e) of the Code.
    Provided that, the excess of the ‘de minimis’ benefits over the ir respective ceilings
    prescribed by these regulations shall be considered as part of ‘other benefits’ and the
    employee receiving it will be subject to tax only on the excess over the P30,000.00
    ceiling. Provided, further, that MWEs receiving ‘other benefits’ exceeding the
    P30,000.00 limit shall be taxable on the excess benefits, as well as on his salaries,
    wages and allowances, just like an employee receiving compensation income beyond
    the SMW.

    I hope you already get the idea.

  5. Are the 13th month pay and other benefits separately considered in computing for the excess over 30,000? What if the 13th month pay alone is above 30,000 and the other benefits is less than 30,000? Which one will be taxed? thanks.

  6. What is the status of the case in the Supreme Court questioning the BIR’s implementation of the Personal Exemptions provisions of RA 9504? I read somewhere that Senators Escudero and Roxas were supposed to file such a case.

    Is the BIR correct in saying that the additional personal exemptions are applicable only from July 2008?

  7. what is the tax rate on the representation allowance of supervisors and managers? pls give brief explanation about allowances for supervisors/managers. what particular expenses are allowed to claim against their allowances? are they obliged to submit receipts for their expenses? what are the types of receipts they’re going to submit to the employer?thanks

  8. Is meal allowance considered “de minimis benefit”? is there a ceiling for it to be considered “de minimis” (like a 1,500 a month rice alllowance)?

    • The law does not specifically state about any ceiling. It is basically subjective, to wit:

      those of relatively small value and offered or furnished as a means of promoting the health, goodwill, contentment and efficiency of an employee, and those furnished for the convenience of the employer, are exempt.

      Mea allowance and rice allowance for such amounts are in my opinion should qualify as a deminimis benifets, provided that they are provided to rank-and-file employees.

  9. what if i receive a 13th month pay of 12,500.00 and a fixed monthly allowance of P5,000.00. this allowance covers subsidy for rice,laundry,etc.to sum it up, we receive as fringe benefit the total amount of P72,500.00 per year.according to the law, P30,0000.00 of fringe benefits is tax exempt.can we still claim exemption for P18,000.00 (rice subsidy) and P3,600.00 (laundry) as de minimis benefits?

  10. I lifted this from the BIR’s website http://www.bir.gov.ph/taxinfo/tax_withld.htm#49041 and tried to derive its maximum allowable per item per year.

    The following shall be considered De Minimis benefits not subject to income tax, hence not subject to withholding tax on compensation income of both managerial and rank and file employees:

    5,038.83 Monetized unused vacation leave credits of private employees not exceeding ten (10) days during the year
    1,500.00 Medical cash allowance to dependents of employees not exceeding P750.00 per employee per semester or P125.00 per month.
    18,000.00 Rice subsidy of P1,500 or one sack of 50 kg. rice per month amounting to not more than P1,500
    4,000.00 Uniform and clothing allowance not exceeding P4,000 per annum
    10,000.00 Actual yearly medical benefits not exceeding P10,000 per annum
    3,600.00 Laundry allowance not exceeding P300.00 per month
    10,000.00 Employees achievement awards not exceeding P10,000
    5,000.00 Gifts given during Christmas and major anniversary celebration not exceeding P5,000.00 per annum
    0.00 Flowers, fruits, books, or similar items given to employees under special circumstances
    0.00 Daily meal allowance for overtime work not exceeding 25% of the basic minimum wage
    —————————————-
    Does this mean a Php57,138.83 tax exempt Maximum Annual De Minimis benefits per employee?

    I think not, 27,138.83 will be subject to tax.

    De minimis is just a name for those benefits so as not to confuse it with other benefits like premiums and proceeds to & from sss, philhealth and pag-ibig.

    It would’ve been great though if our DOF Secreatary can just set the ceiling for de minimis outside of the 30K.

    • I think the whole Php57,138.83 shouldn’t be taxable because each de minimis benefit ddn’t exceed their limits….As regards to the 30,000 ceiling…de minimis benefit will be taxed upon exceeding their limit provided that it also exceed the 30,000 ceiling upon adding the excess amount of the de minimis benefit limit.

  11. @Tiffany — unfortunately, our lawmakers and policymakers seem to intentionally leave gray areas to our laws, policies, and guidelines, to leave room for… well… “corruption”!

  12. question: regarding the de minimis benefits, our company provide us performance incentive, transportation and meal alowances, does the 30k ceiling apply to each item or to the accumulated total of all benefits?

  13. question: sss, philhealth and pag-ibig contributions are being paid to the respective collecting agencies, why is it that in BIR Form No. 2316 (July 2008 ENCS) it is included in the nontaxable/exempt compensation income, whereas if we total the amount of all benefits included in that category this contributions will be added also and, thus, subject to the 30k ceiling?

  14. I agree on the part of “corruption” well law makers leave gray areas to allow such to be one reason for themselves to be able to go around the law. As you said the law is kinda conflicting because withe the total deminimis reaching 57T aomething but a sit says any in excess of the 30,000 will be taxable…it permits business owners and accountants to make ways to hide other expenses which will fall under deminimis to have the company another claim while giving benefits to key employees

    • The whole amount shouldn’t be taxable,,,we will only add the De Minimis Benefit to the 30000 ceiling upon exceeding the maximum allowable amount of each de minimis benefit…

  15. we are receiving annually a 50k christmas package. however, lately there are queries whether or not it is taxable. during the previous years, we received the whole amount without being taxed under the de minimis fringe benefits rule. does it apply?

    • Maybe the 50K Christmas package in the previous years were net of tax, i.e., the company shoulders the tax. But for that purpose, it obviously does not apply as de minimis benefit, and should be computed against the 30K rule of tax exemption.

  16. may i ask is there a new law as of september 2011 stipulating that all De Minimis Benefits are taxable as we are being informed by our employer? can this be true? because if this is so, then all our work will just go to taxes!!!!

  17. Can gifts (e.g. Christmas gifts) as defined in the de minimis policy be paid out in cash instead of in kind? Or will cash /gift certificate be considered taxable even as a Christmas gift?

  18. The 30,000 is not taxable if the 13th month pay falls on that amount. How about it happen that the 13th month pay is 50,000. what will happen to 20,000.00? it should be taxable isnt it? so, whats the formula of getting the tax in excess of 30,000.00

  19. we do provide de minimis benefits to our employees (given as cash together w/ salary). question? do they need to submit receipts equivalent to the amount of the de minimis?

    • If it qualifies as De Minimis Benefit then no need. But note there is a distinction between the de minimis benefits and any tax-shield compensation wherein employees submit receipts.

    • Tax shield compensation are those paid to employees but are usually subject to liquidation and should be supported by receipts like gas and food.

      As far as the BIR is concerned, they are expenses of the company categorized under transportation and/or representation expenses, and not employee salaries and/or benefits. That’s why the BIR schemed a maximum allowable deduction towards representation expenses.

  20. Please confirm if tama po ang pinag sasabi ko:

    Here we Go!

    Unang una po, observe natin yung 30,000 ceiling for deminimis benefits.
    Iba din po yung 30,000 ceiling for 13th month pay.

    Example:
    Kung yung employer ko ay nag bigay ng monthly 2,000 Rice Subsidy at Uniform and clothing allowance of 7,000. They provide 32,000 13th month pay.

    Solution:
    Tandaan po natin ang allowed Rice Subsidy provided by BIR is 1,500 monthly.
    Tandaan po nating ang allowed Uniform and Clothing Allowance provided by BIR is 5,000 per annum.
    We also have ceiling of 30,000 for 13th month pay.

    Lets compute:

    1. Rice Subsidy 2,000 – 1,500 = 500 x 12 months= P6,000
    2. Uniform and Clothing Allow: 7,000 – 5000 = P2,000
    3. 13th Month Pay: 32,000 – 30,000= P2,000

    Total Ceiling 30,000
    Less:
    Rice Subsidy 6,000
    Clothing 2,000
    13th MP 2,000
    ————————–
    Total 20,000
    ================

    Meaning po, yung excess ng Rice Subsidy, Clothing and 13th month will be form part of our 30,000 ceiling for de minimis benefits. kung lumagpas po tayo sa 30,000 ceiling. yung excess po noon will be considered as taxable compensation.

    Sana Naka tulong ako.

    • hi James,
      I’m confused with the tax shield compensation. Can you enlighten me the difference of tax shield and de minimis? My former employer is using de minimis allowances. thanks for your help.
      denimskie

  21. Hi, is there a ceiling for reimbursable expenses such as travel allowance?
    Also I wanted to ask if what are the other tax-exempt benefits that can be given to both rank-and-file and managerial employees like car maintenance allowance or the like. Thanks!

  22. Hi, is there a ceiling for reimbursable expenses such as travel allowance?
    Also I wanted to ask if what are the other tax-exempt benefits that can be given to both rank-and-file and managerial employees like car maintenance allowance or the like. Thanks!

    Another, can you explain a bit the fringe benefits?

  23. Hi, just a query. We are given a fixed salary (reflected on our signed contract) however just this month, part of our basic salary was converted to de minimis allowance without any notice. Is it lawfully right? I understand that it would be an advantage to specifically on our withholding tax but would it affect our statutory contribution, 13th month pay and other benefits?

  24. Excellent piece , I loved the information . Does anyone know if my company can locate a sample PH BIR Form 2551M form to fill in ?

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