TAXATION OF EMPLOYEES’ BENEFITS

Read also: WHAT IS NON-DIMINUTION OF BENEFITS?

• Some|benefits provided by employer to employees are not subject to tax

• De minimis benefits are privileges of relatively small value and provided by the employer to employees

• De minimis benefits constitutes an additional salary that is not deducted as withholding tax on compensation

Monetized unused vacation leave credits of private employees not exceeding ten (10) days during the year is tax exempt.

Are there other tax exemptions?

The law says:

Yes, there are.

They are de minimis benefits. De minimis benefits are benefits of relatively small values provided by the employers to the employee on top of the basic compensation intended for the general welfare of the employees. These are not subject to income tax as well as withholding tax on compensation of both managerial, and rank and file employees.

Under the TRAIN law and its implementing rules and regulations, the following de minimis benefits are not subject to income tax as well as withholding tax on compensation income of both managerial, and rank and file employees:

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 of rice per month amounting to not more than P2,000
5. Uniform and clothing allowance not exceeding P6,000 per annum
6. Laundry allowance not exceeding P300 per month
7. Employees achievements awards which must be in the form of tangible personal property other than cash or gift certificate, with an annual monetary value not exceeding P10,000 received by employee under an established written plan which does not discriminate in favor of highly paid employees
8. Gifts made during Christmas and major anniversary celebrations not exceeding P5,000 per employee per annum
9. Daily meal allowance for overtime work and night/graveyard shift not exceeding twenty-five percent (25%) of the basic minimum wage on a per region basis
10. Benefits received by an employee by virtue of a collective bargaining agreement (CBA) and productivity incentive schemes provided that the total monetary value received from both CBA and productivity incentive schemes combined do not exceed P10,000 per employee per taxable year.

What if there are other de minimis benefits but not included in the above enumeration?

Bureau of Internal Revenue Regulations says:

All other benefits given by employers which are not included in the above enumeration shall not be considered as “de minimis” benefits. Thus, anything not included in the said enumeration is subject to income tax as well as withholding tax on compensation income.

What if the employer provides benefits which are higher than the above provided ceiling?

If the employer provides more than the ceiling or limitations, the amount in excess of the limit would be taxable and subject to withholding tax on compensation. However, such excess is subject to the rule on the P90,000 amount for 13^th month pay and other benefits where excess de minimis benefits may not be taxable if the total of such excess plus the 13^th month pay and other benefits is within the P90,000 limitation.

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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