In the passage of TRAIN 1, let us take a look at one of the changes in the medical insurance provided by employers to its employees including dependents under a group policy.
My medical coverage
You may have been using your company's medical insurance at times you had a check up with your doctor. In some cases, your company may also pay for the insurance of your dependents or allow you to cover them with insurance at discounted rates. It times of uncertainty, this benefit is very important for a working person and its family.
Prior to TRAIN 1
Medical insurance provided by employer to employees under a group policy is considered nontaxable for both rank-and-file and supervisory/managerial employee. However, insurance of dependents is taxable either to withholding tax on compensation (WTC) for rank-and-file employee and fringe benefit tax for supervisory/managerial employee.
Now with TRAIN 1
Under Revenue Memorandum Circular 50-2018, premium health card paid by employer for rank-and-file and managerial employees under a group insurance will be included as part of other benefits subject to P90,000 non-taxable income threshold.
Why there is transition of taxability?
In general, any incentives given to employees shall form part of the compensation subject to income tax , unless specifically exempted under special law or incentives are in the nature of “de minimis” benefits. Upon checking the Consolidate Fringe Benefit Tax Regulations, the cost of premiums borne by the employer under group insurance is considered nontaxable fringe benefit. Hence, BIR may have determined that these medical benefits are not specifically identified as nontaxable with regards to WTC. So, they reversed the taxability in favor of them.
How will this impact you?
You may start to see taxable medical insurance in your payslip and BIR Form 2316 at year-end. This means tax is withheld from you for having these medical benefits.
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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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