Professional Documents
Culture Documents
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Taxation 2005
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We reply as follows.
In general, the term "compensation" means all remuneration for services
performed by an employee for his employee under an employer-employee
relationship, unless specifically excluded by the Tax Code of 1997. The name and
basis by which the remuneration for services is designated is immaterial in
determining whether the remuneration constitutes compensation. Thus, fringe
benefits, unless specifically excluded from gross income and unless subject to the
fringe benefits tax under Section 33 of the Tax Code of 1997, would generally
constitute compensation to the recipient. (Sec. 2.78.1(A), Revenue Regulations No.
2-98) Furthermore, any good, service or other benefit furnished or granted in cash or
in kind by an employer to an individual employee, except rank and file employees as
defined, shall generally be understood as fringe benefits, and as such, shall be subject
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to the fringe benefits tax, unless specifically excluded under the Tax Code of 1997, as
implemented according to rules and regulations as are necessary to carry out
efficiently and fairly the provisions of the Code. (Section 33, Tax Code of 1997, as
implemented by Revenue Regulations No. 3-98, as amended.)
De minimis benefits are facilities or privileges furnished or offered by an
employer to his employees that are relatively small value and offered or furnished by
the employer merely as a means of promoting the health, goodwill, contentment, or
efficiency of his employees, and as such, they are subject to neither compensation
income tax nor fringe benefits tax. They are, therefore, not subject to withholding tax
as well. (Sec. 2.78.1(A)(3), Revenue Regulations No. 2-98, as amended by Revenue
Regulations 8-2000; Sec. 2.33.(C), Revenue Regulations No. 3-98, implementing
Section 33(C)(4) of the Tax Code of 1997.)
Accordingly, the amount of de minimis benefits conforming to the maximum
values prescribed for each of the benefits enumerated in Revenue Regulations Nos.
3-98, as amended by Revenue Regulations Nos. 8-2000 and 10-2000 shall not be
considered in determining the Php30,000 threshold of "Other Benefits" provided in
Section 32(B)(7)(c) of the Tax Code of 1997. However, any amount of fringe benefits
paid by the employer that is in excess of the maximum values set in the stated
Regulations shall be considered, along with the "Other Benefits", in determining
whether or not the Php30,000 threshold has been exceeded, and the excess thereof
shall become taxable to the employee receiving the benefits. (Sec. 2.78.1(A)(3),
Revenue Regulations No. 2-98, as amended by Revenue Regulations 8-2000).
On the basis of the foregoing, we proceed to respond to your specific concerns.
1. The meal and food benefits provided by the client-companies to their
employees through Sodexho meal and food vouchers may be considered tax-exempt
benefits.
The meal and food benefits provided to their employees by client companies
through Sodexho meal and food vouchers may be tax-exempt, subject to the standards
set for de minimis thresholds for fringe benefits under Revenue Regulations No. 3-98,
as amended by Revenue Regulations No. 8-2000 and 10-2000, and further, to the
conditions set for the benefits to be exempt pursuant to the tests of convenience of the
employer and the promotion of health, goodwill, contentment, or efficiency of the
employees under Sec. 2-78.1(A)(2) and (3) of Revenue Regulations No. 2-98, as
amended by Revenue Regulations No. 8-2000 and 10-2000. The name and basis upon
which the benefits are to be given are immaterial in determining whether such would
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constitute taxable income. Thus, whether or not the benefits are administered by the
company itself or through Sodexho, as the conduit, would not be the determining
factor; rather, the determination must be made according to the standards laid down in
the implementing Regulations.
Accordingly, the value of the meals provided to an employee in addition to his
remuneration for services rendered, if furnished to such employee for the convenience
of the employer, shall not be added to the remuneration paid for the purpose of
determining the amount of compensation subject to income and withholding tax.
Neither shall facilities or privileges that are of relatively small value constitute
compensation income if these are offered or furnished by the employer merely as a
means of promoting the health, goodwill, contentment, or efficiency of his
employees. (Sec. 2.78.1(A)(2) and (3), Revenue Regulations No. 2-98, as amended)
In the same token, the de minimis benefits which are not subject to fringe
benefits tax refer to those same facilities and privileges furnished or offered by an
employer to his employees that are of relatively small value and are being offered or
furnished by the employer merely as a means of promoting the health, goodwill,
contentment, or efficiency of his employer such as the following:
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Rice subsidy of Php1,000 or one (1) sack of 50-kg rice per month
amounting to not more than Php1,000;
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2. The meal and food allowance, although not for overtime work, is
considered de minimis if it does not exceed 25% of the basic minimum wage.
Revenue Regulations 3-98, as amended by Revenue Regulations 8-2000 and
10-2000 are illustrative and non-exclusive in the enumeration of what constitutes de
minimis fringe benefits. Accordingly, we rule that the meal and food benefits granted
through Sodexho meal and food vouchers, although not intended to be used for
overtime work, may still be added in the above enumeration. However, in terms of de
minimis threshold for regular meal and food benefits, the ceiling for benefits of
similar nature under Revenue Regulations No. 8-2000 should be used as guidelines.
Such being the case, meal and food benefits not exceeding 25% of the daily minimum
wage may be considered de minimis meal benefit and therefore, tax exempt. The
excess over this amount shall be considered other benefits as contemplated under
Section 32(B)(7)(e)(iv) of the Tax Code of 1997. The excess of the meal and food
allowance given over the de minimis ceiling shall still be exempt provided that it,
together with the total amount of other benefits, shall not exceed Php30,000.
3. The rules and regulations on de minimis benefits do not allow
aggregation of the amounts set for each type of benefit.
In keeping with the spirit of the rules and regulations on de minimis benefits,
we rule that there can be no aggregation of the values set for each item of benefit
stated in Revenue Regulations Nos. 2-98 and 3-98, as amended by Revenue
Regulations Nos. 8-2000 and 10-2000. The intent of the Regulations is to treat each
item of de minimis benefits independently of each other, and we have to give life to
that intent. Thus, the Regulations separately provide maximum values for rice
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