Amendments on De Minimis Benefits Tax Exemption

The Regulations further amend the “de minimis” framework to govern benefits that are exempt from income tax on compensation.
The Regulations also cover “de minimis” benefits that are exempt from fringe benefit tax.
The Regulations treat certain employer-provided facilities and privileges of relatively small value as “de minimis” for income and fringe benefit tax purposes.
The “de minimis” character applies when benefits are provided as a means of promoting the health, goodwill, contentment, or efficiency of employees.
“De minimis” benefits are treated as benefits offered or furnished by the employer merely for that employee-promotion purpose.

Section 2 amends Section 2.78.1 (A)(3)(c) and (d) of RR 2-98, as last amended by RR 10-2000, by replacing the enumerated thresholds and wording.
The Regulations specify that the following are “de minimis” benefits not subject to income tax and withholding tax on compensation income of both managerial and rank and file employees.
The “de minimis” income-tax treatment includes rice subsidy of P1,500.00 or one (1) sack of 50 kg. rice per month amounting to not more than P1,500.00.
The “de minimis” income-tax treatment includes uniform and clothing allowance not exceeding P4,000.00 per annum.

Section 2 further amends Section 2.33(C) of RR 3-98, as last amended by RR 10-2000, governing which fringe benefits are not subject to fringe benefit tax.
The Regulations state that “de minimis benefits which are exempt from the fringe benefit tax” are, in general, limited to facilities or privileges of relatively small value.
The Regulations require that the employer provides such de minimis facilities or privileges merely as a means of promoting the health, goodwill, contentment, or efficiency of employees.
The fringe benefit tax “de minimis” treatment includes rice subsidy of P1,500.00 or one (1) sack of 50 kg. rice per month amounting to not more than P1,500.00.
The fringe benefit tax “de minimis” treatment includes uniform and clothing allowance not exceeding P4,000.00 per annum.

The Regulations provide a transitory application: the benefits authorized by these amendments apply to income earned starting the year 2008.

All existing rules and regulations or parts thereof that are inconsistent with the Regulations are revoked, repealed or modified accordingly.

The “de minimis” rice subsidy threshold is P1,500.00 or one (1) sack of 50 kg. rice per month, amounting to not more than P1,500.00.
The “de minimis” uniform and clothing allowance threshold is not exceeding P4,000.00 per annum.
These thresholds apply for purposes of exemption from income tax on compensation and fringe benefit tax, and for the corresponding treatment as “de minimis” benefits.