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Sat | 07/25/2015 09:53am | Forex: $1:45.490
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The example can be made of an employees use of the company vacation house: this is income
to the employee because the use of the house arose out of the employer-employee relationship
and, more importantly, benefitted the employee to the extent that he did not have to pay for
lodging. However, depending on the circumstances, the benefit granted to an employee may be
of such a trivial amount (hence, de minimis) that its reporting would be, for practical purposes,
impossible: in other words, valuing the vacation house stay would be a useless economic
exercise.
Conversely, more substantial benefits are subject to a fringe benefit tax of 32 percent on the
grossed up value of fringe benefit enjoyed by the employee. The Tax Code enumerates some
examples of taxable fringe benefits. In the case of supervisory and managerial employees these
include housing, expense accounts, vehicles, and the like. (This rule, however, exempts these
items from taxation when they are given clearly for the benefit of the employer; e.g., employee
housing located proximately to the work place.
The de minimis benefits enumerated by RR 2-98 may arise out of practical considerations in the
mode of the vacation house example I mentioned earlier. Other examples given by RR 2-98
include: flowers, fruits, books or similar items given to employees under special circumstances,
e.g., on account of illness, birth of a baby, etc. or laundry allowance not exceeding P300 per
month.
Business ( Article MRec ), pagematch: 1, sectionmatch: 1
Certain de minimis benefits are actually given for the employers convenience, such as uniform
allowance not exceeding P5,000.
The Tax Code and regulations also recognize de minimis benefits as a tool of social welfare.
Thus, Section 2.78.1 (3) of RR 2-98 states that these are provided for the health, goodwill,
contentmentof his employees. Examples of what I consider as RR 2-1998s social welfare
provisions are:
1. Monetized unused vacation leave credits of private employees not exceeding 10 days during
the year and the monetized value of leave credits paid to government officials and employees.
2. Medical cash allowance to employee dependents not exceeding (P750 per employee per
semester or P125 per month).
3. Rice subsidy of P1,500 or one sack of 50 kg. rice.
4. Actual yearly medical benefits not exceeding P10,000 per month.
5. Daily meal allowance for overtime work not exceeding 25 percent of the basic minimum
wage.
Clearly, the P10,000 de minimis benefit granted by RR 1-2015 falls within this latter category.
With the addition of this benefit, total de minimis benefits that an employee may enjoy are at
least worth P63,100 (this does not count the effects of additional variable de minimis benefits,
such as the unutilized vacation leave credits). If one were to add another type of benefit, viz., the
exemption from income tax on the first P30,000 of 13th month pay and other benefits granted
by Tax Code Section (B)(7)(e), then the total benefits tax exemption is P93,100 (again, not
counting variable de minimis benefits). From my conversations with DoF officials this seems to
be the proper interpretation of RR 1-2015.
On the whole and taking into consideration the nature of de minimis benefits I would say that
this is a good faith effort on governments part to expand de minimis coverage. Others might
grouse and say its not enough (it never is!), but this is one gift horse I wont look in the mouth
Ill take it. Happy New Year!
Emmanuel P. Bonoan is the vice chairman, chief operating officer and head of tax of R.G.
Manabat & Co. (RGM&Co.), the Philippine member firm of KPMG International.
This article is for general information purposes only and should not be considered as professional
advice to a specific issue or entity.
The views and opinions expressed herein are those of the author and do not necessarily represent
the views and opinions of KPMG International or RGM&Co. For comments or inquiries, please
email ph-kpmgmla@kpmg.com or rgmanabat@kpmg.com.
For more information on KPMG in the Philippines, you may visit www.kpmg.com.ph.
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