De Minimis Benefits

 De minimis benefits are facilities and privileges of relatively small value and provided by
an employer to employees merely as a means to promote their health, goodwill,
contentment, or efficiency.
- Regardless whether the employer is a private entity or government entity. Aside
sa other bonuses na natatanggap ng employee, kahit sino matutuwa kung
mapopromote yung health, goodwill, contentment or efficiency, lahat naman
mamomotivate na magtrabaho dahil ramdam ang care ng ating employer.
- The amount of these benefits are relatively small value. However kahit maliit ang
value ng benefit na received natin, hindi automatic na de minimis yun.
 These benefits are exempt from withholding tax on compensation (WTC) and fringe
benefits tax (FBT).
- Regardless sa rank ng employee, it may be provided sa rank and file or
supervisory managerial employee. It may be provided by a private entity or
government entity including government owned and control corporations.

RR 2-98 RR 10-2008 as amended by RR 5-2011, RR 8-2012 and RR 1-2015, RR 8-2018

The following shall be considered de minimis benefits 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 “10 days”
during the year.
 Payment of monetized unused “vacation” leave credits exceeding 10 days as well as
payment of “sick” leave regardless of number of days shall be added to “other benefits”
with a P90,000 ceiling. Any amount exceeding the P90,000 ceiling discussed in page 156
shall be subject to basic and creditable withholding tax on compensation income (RR No.
9-2018)
- Vacation leave at dapat hindi nagamit at na monetized. Example, absent ka sa
work at nagfile ka ng vacation leave ay hindi ka kinaltasan ng sahod. Hindi
kasama dito sa de minimis kase ang pinaguusapan ay vacation leave na unused.
- Halimbawa ulit, private entity ang employer mo, ang vacation leave niyo ay 15
days at nagamit mo ang 10 days so may natitira pang 5 days. After ng taxable
year hindi nagamit yung 5 days at kung namonetized or converted into cash. In
this case, it is de minimis or not subject to income tax.
- Kapag lumagpas sa 90k, yung excess ay taxable at considered as income kaya
subject sa basic tax regardless sa rank ng employee.
- Kapag sick leave regardless of the number of days, idadagdag agad sa other
benefits, it will not be called de minimis. Para sa private entity.
2. Monetized value of unused vacation and sick leave credits paid to government officials
and employees.
 Compared to employees in the private sector, payment of monetized unused “vacation
and sick” leave credits to government officials/employees regardless of the number of
days shall be exempt from tax on compensation income.
- Para sa government employees and officials. Lahat ng leave credits na
namonetized at unused ay de minimis.
3. Medical cash allowance to dependents of employees not exceeding P1,500 per semester
of P250 a month.
- Ibig sabihin 3,000 in a year. kapag lagpas, yung excess ay idagdag sa 13th month
pay at other benefits. Kapag dinagdag mo at hindi lagpas 90k, ay exempt. Kapag
lagpas ng 90k yung excess lang ang subject sa basic tax.
4. Rice subsidy of not more than P2,000 per month or 1 sack (50kg.) rice per month.
- Pwedeng pera or pwedeng mismong bigas basta hindi lalagpas pero kung
lumpagpas ay yung excess ay subject to basic tax.
5. Uniforms given to employees by the employer not exceeding P6,000 per annum (as
amended by RR 8-2018).
- Depende kung kalian ibibigay. Hindi kailangan monthly or quarterly basta dapat
ang total in a year ay not more than 6,000.
6. Actual medical assistance given not exceeding P10,000 per annum such as medical
allowance to cover medical and healthcare needs, annual medical/executive check-up,
maternity assistance and routine consultations.
- Para sa empleyado, hindi kagaya ni number 3 na para sa dependents ni employee.
Yung 10,000 ay de minimis.
7. Laundry allowance not exceeding P300 per month.
- So 3,600 in a year. basta hindi lumagpas sa 90k exempt.
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 and annual monetary value not exceeding P10,000 under an established
written plan which does not discriminate in favor of highly paid employees).
- Other than cash, kapag cash ang binigay ay other benefit or 13th month pay. Dapat
itong benefit na ito ay hindi lang para highly paid employee or matataas and
positon kase ito ay applicable sa lahat ng employee.
9. Gifts given during Christmas and major anniversary celebrations not exceeding P5,000
per employee per annum (RR 8-2012).
- Basta in relation sa Christmas season at major celebration. Yung first 5,000 ay
ilagay sa de minimis tapos yung sobra ilalagay sa 13th month pay and other
benefits.
 10. Daily meal allowance for overtime work and night/graveyard shift not exceeding 25% of
the basic minimum wage on a per region basis provided such benefit is given on
account of overtime work or it given to employees on night/graveyard shift.
- May policy na dapat ang meal allowance ay ma provide. Alamin kung magkano
ang minimum wage. At kukunin ang de minimis na 25% sa minimum wage.

The grant of meal allowance, if not overtime work or night/graveyard shift, should be subject to
income tax (RR 05-2011). However, meal allowance and lodging furnished by the employer to
the employees are exempt from tax if furnished for the “advantage or convenience of the
employer”. Meal allowance, in this particular case, should be furnished within the premises of
the employer.

11. Benefits received by an employee by virtue of a collective bargaining agreement (CBA)

and productivity incentive schemes provided that the total annual monetary value
received from the two (2) items above combined, do not exceed P10,000 per employee
per taxable year (RR 1-2015).
- Kung hindi lagpas ng 10k a year de minimis. Kapag lagpas ng 10k ay hindi de
minimis, ilalagay agad sa 13th month pay and other benefits yung whole or entire
amount, with 90k ceiling.

Fringe Benefits compared to 13th month pay and other Benefits.

(29mins.)
Fringe Benefit is defined under Section 2(f) of RR-8-2018 as any goods, service or other benefits
furnished or granted by an employer in cash or in kind, other than the basic compensation, by an
employer to an individual employee. In short, it is a form of pay which may be in the form of
property, services, cash or cash equivalent to supplement a stated pay for the performance of
services. Under the tax code, fringe benefits subject to fringe benefits tax cover only those fringe
benefits given or furnished to a managerial or supervisory employee.

 Ang subject sa fringe benefit tax ay yung holding managerial or supervisory position.
Ang definition na ito ay in relation to fringe benefit tax. Kung ang pinaguusapan ay
fringe benefit na subject sa fringe benefit tax, yan yung mga fringe benefit tax na
dapat granted sa managerial or supervisory employee.
 Kung ang fringe benefit ay granted sa rank and file employee, hindi subject sa fringe
benefit tax pero it will be treated as income it will be subjected to basic tax.

Fringe Benefits

Unless exempt, the following items of fringe benefits received by a supervisory or managerial
employee shall be subject to fringe benefit tax:
 1. Housing – definitely fringe
2. Expense Account – fringe, not other benefit
3. Vehicle of any kind
4. Household personnel, such as maid, driver and others.
5. Interest on loan at less than market rate to the extent of the difference between the market
rate and actual rate granted
6. Membership fees, dues and other expenses borne by the employer for the employee in
social and athletic clubs and similar organizations – shall not pertain to membership fees
na required by the profession or work ni employee.
7. Expenses for foreign travel – mga business related like convention abroad.
8. Holiday and vacation expenses - not pertaining sa company outings. Ito yung personal
benefit na sagot ni company for employee.
9. Educational assistance to the employee or his dependents – kung may kinalaman sa
employee at profession or trabaho.
10. Life or health insurance and other non-life insurance premiums or similar amounts in
excess of what the law allows. – philhealth, pag sumobra ay yun ang fringe benefits.
- Kapag nandito sa list, hindi isasama sa other benefits. Depende sa nature na ibibigay
kung may option ba na mamili kung fringe benefits ba or other benefits.
- Lahat ng fringe benefit ay nag benefit ay ang mga employee.

 The Labor Code distinguishes a rank-and-file employee from a managerial employee.

It provides that a managerial employee is one who is vested with powers of
prerogatives to lay down and execute management policies and/or to hire, transfer,
suspend, lay-off, recall discharge, assign or discipline employees, or to effectively
recommend such managerial actions.
- Kasama ang supervisory kase sila yung may recommendatory powers.
 All employees not falling within this definition are considered rank-and file
employees. Section 3(m) of RR-8-2018 defines rank and file employee as an
employee holding neither managerial nor supervisory position.
- Kung nakatanggap ka ng fringe benefit at ikaw ay rank and file, basic tax yun.
Unless exempt under the law. Kung nakatanggap ka ng fringe benefit at ikaw
ay managerial supervisory, generally subject to FBT.

13th month pay/bonuses and “other benefits” (sec. 2.78 of RR-298, as amended)

 Section 32(B)(7)(E) of the tax code in relation to PD 851 as amended by RA10653

provides that 13th month pay and other benefits received by officials and employees
of public and private entities are exempt from income tax and creditable withholding
tax on compensation, provided, however, that beginning January 1, 2018, the total
exclusion shall not exceed P90,000 (RA 10963-TRAIN Law). Otherwise, the excess
 would form part of an individual’s gross income and would be subject to income tax
and applicable creditable withholding taxes.
- Kung other benefits na hindi lagpas sa 90k, regardless sa position ito ay
exempt. Kung lagpas 90k, regardless of the position yung excess ay subject to
basic tax.

Further, RR 3-2015 emphasized that this exclusion (P90,000) from gross income is not
applicable to:

 Self-employed individuals; and

 Income generated from business

“other benefits” under these regulations include: Sec. 2.78 of RR 2-98, as amended

 Christmas bonus – 5k ay pasok sa de minimis and yung excess ay yun ang ipasok sa other
benefit na may limit sa 90k
 Productivity incentive bonus – kung hindi more than 10,000 ay de minimis, kapag lagpas
10,000 ay ilalagay sa other benefits.
 Loyalty awards
 Gifts in cash or in kind and other benefits of similar nature actually received by officials
and employees of both government and private offices.
- Ito lang yung pasok sa other benefits. Pag wala dito, fringe benefits yun.
- Kung ikaw ay employer, importante na malaman mo kung fringe benefits or
other benefits ang ibibigay mo at alamin kung managerial supervisory or rank
and file employee.

BIR RULING No, 293-2015 (CBA/CNA and Productivity Incentive Pay):

 If not more than P10,000 – considered as de minimis

 If more than P10,000 – the entire amount shall be included in the “other benefits” with
P90,000 ceiling.

Note: This ruling shall apply only to benefits under CBA and productivity incentive schemes
CBA may also be referred to as CNA (Collective Negotiation Agreement).

How to compute Fringe benefits (31 mins.)

Nature of Fringe Benefit Tax
  FBT is a final tax imposed on the employee withheld by the employer, computed at 35%
(Beg. Jan. 1, 2018) on the grossed-up monetary value (GUMV) of the fringe benefit
granted by the employer to an employee who holds a managerial or supervisory position.
 Being a final tax, the FBT is collected or withheld at source by the employer. FBT shall
be withheld and paid by the employer (thus, the employer is the one liable to pay the
FBT).
 FBT is effective regardless of whether the employer is n individual, professional
partnership or a corporation (regardless of whether the corporation is taxable or not), the
government or its instrumentalities.

Fringe Benefit Tax Base and Rate

CIT., RA, NRAET NRA-NETB
Monetary Value Pxx Pxx
Divide by gross monetary value factor 65% 75%
Grossed-up monetary value [OPEX] Pxx Pxx
x FBT Rate 35% 25%
Fringe Benefit Tax (FBT) Pxx Pxx
Ex. 65,000 Monetary Value

Monetary Value P65,000

Divide by gross monetary value factor 65%
Grossed-up monetary value [OPEX] P100,000
x FBT Rate 35%
Fringe Benefit Tax (FBT) P35,000

How to compute FBT?

In general, Fringe Benefit Tax rate is 35% (beg. Jan. 1, 2017 or upon the effectivity of train law).
However, FBT rate for nonresident alien not-engaged in trade or business is 25%.

The Computation of the Fringe Benefits Tax is done by:

1. Evaluating the value of the benefit granted or determining the monetary value. – kapag
hindi cash, fair value.
2. Determining the proportion or percentage (Gross Monetary Factor) of the benefit which
is subject to the FBT. – 65% or 75%
3. Determining the Grossed-up monetary value of the fringe benefit by dividing the
monetary value of the fringe benefit by the gross monetary value factor, and
4. Multiplying the grossed-up monetary value factor by the FBT rate.

Illustration A:

Determine the grossed-up monetary value and the fringe benefit tax of the following:
 1. P39,000 grocery allowance for the personal consumption of an executive of ABC
corporation.
- 39,000 / .65 = P60,000
- 60,000 x .35 = P21,000
- Journal Entry (Employer)
- Dr. FB Expense – 39,000
- Dr. FBT Expense – 21,000
- Cr. Cash 60,000
2. P40,800 expenses paid by an executive of ABC corporation duly receipted for in the
name of ABC corporation and is not in the nature of personal expense.
- Hindi dapat compute-an ng FBT kase hindi fringe benefit.
3. P40,800 expenses incurred by an executive of ABC corporation in connection with
attending business meeting or convention.
- Hindi dapat compute-an ng FBT kase hindi fringe benefit.
4. P40,800 grocery allowance for the personal consumption of one of ABC Corporation’s
Rank and File employees.
- Hindi dapat compute-an ng FBT kase hindi fringe benefit.

Valuation of Fringe Benefits

 If granted in money, the value is the amount granted.

 If granted in property and ownership is transferred to the employee, the value is the fair
market value of the property or FB.

Illustration B:

Assume an employer furnished cash fringe benefit subject to fringe benefit tax amounting to
P975,000.

- 975,000 / .65 = 1,500,000 (GUMV)

- 1,500,000 x .35 = 525,000 (FBT)

Question 1: What should be the appropriate journal entry in the books of the employer?

Fringe benefit expense P975,000

Fringe benefit tax expense 525,000

Cash P975,000
FBT Payable 525,000
Question 2: Assume that the cash benefit is not subject to fringe benefit tax, what should be the
appropriate journal entry of the employer?

Journal Entry:

Compensation Expense P975,000

Cash P975,000

TAX-EXEMPT FRINGE BENEFIT (13mins.)

The following fringe benefits shall not be subject to basic tax or fringe benefit tax:

1. Benefits given to rank and file employees, whether granted under CBA or not.
 Ang mga subject sa fringe benefits tax are those received by employees holding
managerial or supervisory position. kapag ang tumanggap ay rank and file employee,
ang treatment ay parang sahod lang kaya subject yan sa creditable withholding tax on
compensation income. Subject yan sa basic tax.
2. De minimis beneifts
 Hindi subject sa fringe benefit tax regardless of the position of the employee kahit
rank and file employee or managerial or supervisory employee basta de minimis hindi
subject sa FBT.
 Kung yung amount ay masyadong Malaki, halimbawa ang rice allowance, 5000, pero
ang ceiling lang ng rice allowance ay 2000 so may diff. na 3000 which is yung excess
ng natanggap na de minimis over the ceiling ay idadagdag sa 13th month pay or other
benefits regardless kung anong position ni employee.
3. Fringe Benefits which are authorized and exempted from income tax under any
special law such as:
 Contributions of the employer for the employee:
 As required under SSS law, GSIS law
 Similar contributions under an existing law
 Premiums for group Insurance of employees
 For retirement plan
 Halimbawa, employer na magpapasahod sa mga empleyado, si employee may sahod
na 30,000 per month pero hindi lang yun ang gastos ni employer kase nagbabayad din
siya ng SSS, philhealth, pag-ibig na additional benefits yun ni employee. However,
kahit na ang employee na yun ay holding supervisory position, hindi yung isusubject
sa FBT kase ang tawag sa mga income na yan ay exclusion or exempt from income
tax.
4. 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.
  In short, kailangan sa trabaho. Halimbawa yung empleyado ay CPA’s, magbabayad
sila ng public practice, etc. kung ang employer ay nag decide na siya ang magbabayad
ng mga yun, it is considered to be required by the nature of the employer. Hindi
itatrato na fringe benefits ni employee.
5. If the grant of benefits for the convenience or advantage of the employer.
 Bago sabihing fringe benefit, dapat ang nagbenefit ay employee. Kung mas nag
benefit pa si employer kesa kay employee, dapat operating expense lang ni employer
yun hindi dapat income ni employee. Halimbawa, manufacturing company, pero
malayo ang mga empleyado kaya ang ginagawa nagkakaroon ng employee quarter o
mga tirahan nila within 50 meters away. Mas nakinabang ang employer kase hindi na
uuwi palagi ang employee so hindi na siya malelate. So it is for the convenience of
the employer. Hindi siya fringe benefit ni employee kaya hindi subject sa fringe
benefit tax.