De Minimis Benefits vs. Fringe Benefits

This is horrible. Fringe and De Minimis benefits are good policy for business people since these benefits are intended to encourage employee loyalty. The whole trouble is the NIRC's provisions on these benefits do not encourage happy and loyal labor.

Fringe Benefits

Fringe Benefits are given to employees above rank-and-file and include housing, vehicles, educational assistance to the employee or his dependents, holiday or vacation expenses, expense accounts, membership fees and dues in social and athletic clubs or similar organizations that are paid for by the employer, interest on loans at less than the market rate to the extent of the difference between the actual rate granted and the market rate (difference between the actual market rate of 12% and the interest rate assumed by the employee,) foreign travel expenses and even life, health and non-life insurance greater than what is prescribed by law. These benefits are taxed at 32% of their gross monetary value. The computation is done this way:

Grossed-up Monetary Value = Monetary Value/68% so:

Fringe Benefit Tax = Grossed-up Monetary Value x 32%

The grossed-up monetary value consists of the net amount of money/monetary property value received and the amount of fringe benefit tax due and paid by the employer on the employee's behalf.

The net monetary value is determined in 2 ways:

1.) If ownership of the property is transferred to the employee, the net monetary value is the fair market value of the property. The fair market value is determined either by the BIR (zonal value) or local assessor, whichever is higher.

2.) If ownership of the property wasn't transferred to the employee, the net monetary value is the property's depreciation value.

De Minimis

These benefits are benefits of a small value granted to rank-and-file employees and are ordinarily not taxed. They include (but aren't limited to) the following:

1.) Monetized unused vacation leaves per year (maximum of 10 days)

2.) Medical cash allowance (maximum of P750/semester or Php125/month)

3.) Rice subsidy (maximum Php1,500/month)

4.) Laundry allowance (maximum of Php300/month)

5.) Actual yearly medical benefits (maximum of Php10,000/year)

6.) Uniform allowance (maximum of Php4,000/year)

5.) Gifts for Christmas and major celebrations (maximum of Php5,000/year)

6.) Daily meal allowance (maximum of 25% of the basic minimum wage)

7.) Employees achievement awards in the form of tangible personal property other than cash or gift certificates with an annual monetary value of Php10,000 maximum

8.) Flowers, fruits, books or similar items given on account of illness, marriage or other special circumstances

9.) Facilities and privileges like entertainment, medical services and "courtesy" discounts on purchases.

If the employee is given benefits that exceed the maximum limits, the excess is added to the 13th month pay, productivity incentives and Christmas bonus. Here's where things get ugly: if the total of the computation is greater than P82,000 (it used to be P30,000 before February of 2015,) it becomes taxable as part of the employee's gross income.