Categories: Income Tax

De minimis BenefitsTrain Law 2019

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Does train tax reform affect the de minimis benefits in the Philippines?  The answer is Yes. This update will help you to know the de minimis benefits new ceiling amount 2018 and on how to compute your withholding tax and individual income tax.  After the discussion of de minimis benefits, you will learn how to compute and up to what amount of income is still not subject to tax. Well, before answering this question let us know first what is de minimis benefits?

Meaning of De minimis Benefits Train Law ?

What is de minimis benefits 2018? Here are the updates of de minimis benefits Philippines train law. Let’s start first as to what is de minimis benefits? These are benefits given by the company to the employees in addition to their regular compensation. These are subject by law or governed by special laws.

These benefits are given to the employees to recognize their efforts and contributions to the company. It is a small amount added to the compensation or salary of the employee. Learn the new updates of de minimis benefits 2019.

Before we discuss the updates, let’s understand the definition and how it is different to fringe benefits tax. You may learn other updates on Tax Reform for Acceleration and Inclusion (TRAIN) Act.

De minimis Benefits 2018

What is the meaning of this term in the field of taxation?. Well, these terms are incentives or privileges of relatively small value. Certainly, it is given by the employer to his employees either mandated by law or additional compensation according to the performance.

What are De minimis Benefits Train Law?

As of January 1, 2018, under the TRAIN Tax Law, the following are the thresholds amount 2019:

  1. First, convertible unused vacation leave credits of private employees not exceeding ten days during a year.
  2. Second, the convertible value of vacation and sick leave credits paid to government officials and employees
  3. Medical cash allowance to dependents of employees not exceeding 1,500 per semester (before was 750.00) or 250.00 per month (before 125.00)
  4. Rice subsidy of 2, 000.00 (replaced the amount of 1, 500.00) or one sack of 50 kg. rice per month amount to not more than 2, 000.00
  5. Uniform and clothing allowance not exceeding 6, 000 per year (replaced the amount of 5, 000)
  6. Actual medical assistance, e.g., a therapeutic benefit to cover medical and healthcare needs, annual medial/executive check-up, maternity assistance, and routine consultations, not exceeding 10, 000 yearly.
  7. Laundry allowance not exceeding 300 per month

Other Benefits Philippines Train Law

  1. Employees achievement awards, e.g., for a length of service or safety achievement. It must be in the form of tangible personal property other than cash or gift certificate. It has an annual monetary value not exceeding 10,000 received by the employee under an established written plan. This benefit does not discriminate in favor of highly paid employees
  2. Any gifts received during Christmas and major anniversary celebrations not exceeding 5, 000 per employee once a year.
  3. Daily meal allowance for overtime work and nigh/graveyard shift not exceeding 25% of the basic minimum wage on per region basis
  4. Lastly, benefits received by an employee by a collective bargaining annual monetary value received from both this and productivity incentive schemes combined do not exceed 10, 000 per employee per taxable year.

Therefore, all other incentives given by the employer not included above are “other benefits.” These additional benefits will be subject to de minimis benefits ceiling 2018 of 90,000.

How Train Law Updates Affects Individual Tax?

Any benefits given to the employees not listed above are subject to the income tax rate. Likewise, any benefits provided beyond the de minimis amount is part of “Other Benefits,” which will be subject to a ceiling amount of 90, 000.

How to Compute De minimis Benefits 2018 in the Philippines?

Here are some steps to identify taxable income:

  1. Identify if the benefits are part of the list of De minimis Benefits.
    In each benefit, compute the excess beyond the de minimis amount and include as other benefits
  2. Compute the total amount of “Other Benefits” and deduct from the 90, 000 thresholds.
  3. Any excess beyond 90, 000 will be added as taxable compensation income which is subject to Income tax Rate Table.
  4. Lastly, If the total taxable income is below 250, 000 it is non-taxable, otherwise, be subject to income tax rate under TRAIN Law.

Mr. B received rice allowance of 2, 500, and clothing allowance of 10, 000 from his employer. Other benefits are 13th-month pay of 20, 000 and other benefits of 80, 000. Mr. B receives a regular compensation income of 240, 000 in a year. Is Mr. B subject to income tax?

  1. Rice allowance and clothing are part of the de minimis benefits.
  2. There is an excess of 500 and 4,000 in rice allowance and clothing.
    (500 + 4, 000 + 100, 000) 104,500 total other benefits which are subject to the threshold of 90, 000
  3. 14, 500 is the excess beyond the ceiling amount.

So, therefore, Mr. B is taxable using the income tax table.

Conclusions

What did we learn from this article? Well, the de minimis benefits under TRAIN law reform 2018 updated the de minimis ceiling amount. Some de minimis benefits ceiling 2019 amount is more than the previous de minimis thresholds. Importantly, knowing these updates will help you to compute the right withholding tax and personal tax under train law.

For the full issuance, kindly visit the BIR homepage.

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