The Tax Code allows taxpayers to use tax efficiency measures to minimize tax liabilities. This is known as "tax avoidance". Let us check the impact of this on the side of individual/personal taxation.
One of the ways employers can provide tax savings to their employees is to maximize the de-minimis benefits. These are facilities and privileges of relatively small value and provided by an employer to employees merely as a means to promote their health, good will, contentment, or efficiency. These benefits are exempt from withholding tax on compensation (WTC) and fringe benefits tax (FBT).
Let us take a look on the list of de-minimis benefits as updated by TRAIN 1:
a. Monetized unused vacation leave credits of private employees not exceeding 10 days during the year;
b. Medical cash allowance to dependents of employees, not exceeding P1,500 per employee per semester or P250 per month (P125 per month in the old rules);
c. Rice subsidy of P2,000 or one 50-kg sack of rice per month worth not more than P2,000 (P1,500 per month in the old rules);
d. Uniforms and clothing allowance not exceeding P6,000 per annum (P5,000 per annum in the old rules);
e. Actual medical assistance not exceeding P10,000 per annum;
f. Laundry allowance not exceeding P300 per month;
g. Employees’ achievement awards, which must be in the form of tangible personal property other than cash or gift certificates, with an annual monetary value not exceeding P10,000 received by the employee under an established written plan which does not discriminate in favor of highly paid employees;
h. Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per employee per annum;
i. Daily meal allowance for overtime work and night/graveyard shift not exceeding 25% of the basic minimum wage; and
j. Benefits received by an employee by virtue of a Collective Bargaining Agreement (CBA) and productivity incentive schemes, provided the total annual monetary value received from both CBA and productivity incentive schemes combined do not exceed P10,000 per employee per taxable year.
As you can see, employers can actually use a total of P4,175/monthly or P50,100/yearly benefits as de-minimis and hence, nontaxable for WTC and FBT. Please note though that the amounts are only limited to items b,c,d,e,f,h.
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Disclaimer: The views or opinions in this article are mine. This is not a substitute for seeking professional advice.
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