De Minimis are minimal monetary benefits given by employers to their employees. Although these benefits are not government-mandated, any such benefits given to employees will be considered tax-exempt up to a certain amount.
For a benefit to be considered a De Minimis benefit and enjoy tax-exempt status, they will need to fall under very specific classifications. BIR Revenue Regulation 10-2008 has determined that only the following items and their corresponding amounts can be considered De Minimis benefits:
- Rice allowance – ₱1,500 or one 50kg sack of rice per month
- Daily meal allowance for employees on overtime and/or night shift - maximum 25% of the basic minimum wage based on the region.
- Clothing allowance– ₱5,000 per year.
- Employee Medical allowance - ₱10,000 per year.
- Employee dependents medical allowance – ₱125 per month / ₱1,500 per year.
- Laundry allowance - ₱300 per month.
- Employee non-taxable incentives - ₱10,000 per year.
- Employee non-taxable bonus ( Anniversary bonus or bonus given during Christmas, apart from the Christmas bonus) - ₱5,000 per year.
- Collective bargaining agreement (CBA) and productivity incentive schemes - combined, P10,000 per year.
- Unused vacation leave conversion- For the private sector, a maximum of 10 days per year can be converted to cash and be considered De Minimis.
- Unused vacation leaves and sick leaves - For the government sector all converted leaves can be converted to cash and considered De minimis.
Note: Every employee has a tax-free limit ₱82,000 per year, which includes the 13th month bonus and other benefits. If an employee’s 13th month pay and other benefits do not total ₱82,000 per year, employers can go above the prescribed amounts for De Minimis and still be considered tax-free. If the amounts total above ₱82,000 per year, any excess will be added to taxable income. Please also note that De Minimis benefits are different from Tax Shields. Tax Shields are used to lower an employee’s taxable income, while De Minimis benefits are tax free from the start.