FRINGE BENEFITS TAX,

13TH MONTH PAY, AND OTHER

BENEFITS EXCLUDED FROM
GROSS INCOME

GROUP 8 || Buyco | Estoesta | Ramos

13th Month Pay and Other Benefits
Sec. 32(B)(7)(e), NIRC
 Gross benefits received by officials and employees of
public and private entities: Provided, however, That the
13TH MONTH total exclusion under this subparagraph shall not exceed

PAY AND OTHER P90,000 which shall cover:

BENEFITS i) Benefits received by officials and employees of the

national and local government pursuant to Republic Act
No. 6686

Sec. 32(B)(7)(e), NIRC ii) Benefits received by employees pursuant to

Presidential Decree No. 851, as amended by
Memorandum Order No. 28, dated August 13, 1986

iii) Benefits received by officials and employees not

covered by Presidential Decree No. 851, as amended by
Memorandum Order No. 28, dated August 13, 1936; and

iv) Other benefits such as productivity incentives and

Christmas bonus
 ● All officials and employees of the National

RA 6686
Government who have rendered at least four
months of service from January 1 to October
(An Act Authorizing an 31 of each year and who are employed in the
Annual Christmas government service as of October 31 of the
same year shall each receive a Christmas
Bonus to National and bonus equivalent to one month basic salary
Local Government and additional cash gift of One thousand
Officials and Employees pesos (P1,000). (Sec. 1)

starting CY 1988) ● If the official/employee has rendered less

than four months of service, but are
employed in the government service as of
October 31 of the same year, he shall still be
entitled to an additional cash gift ranging
from PHP 100-400 depending on the length
of service. (Sec. 2)
 ● All officials and employees of LGUs may
RA 6686 receive the same benefits, chargeable
(An Act Authorizing an against their respective local funds. (Sec.
4)
Annual Christmas
Bonus to National and ● Barangay Chairmen shall each receive a
Local Government cash gift of One thousand pesos (P1,000).
Officials and Employees (Sec. 5)

starting CY 1988) ● No official or employee shall receive

Christmas bonus from any and all sources
in excess of the one month basic salary
and PHP 1,000 cash gift. (Sec. 6)
 ● WHO ARE ENTITLED TO 13TH MONTH
PAY? rank-and-file employees
PD 851 ● EXEMPTIONS:
○ The Government and any of its political
(Requiring All subdivisions, including GOCCs, excepts those

Employers To Pay corporations operating essentially as private

subsidiaries of the Government;
Their Employees A ○ Employers already paying their employees a
13th month pay or more in a calendar year or
13th-month Pay), as its equivalent at the time of this issuance;
amended by ○ Employers of household helpers and persons
in the personal service of another in relation
Memorandum Order to such workers; and

No. 28 ○ Employers of those who are paid on purely

commission, boundary, or task basis, and
those who are paid a fixed amount for
performing specific work, irrespective of the
time consumed in the performance thereof,
except piece-rate workers in which case the
employer shall grant the required 13th month
pay to such workers
 ● MINIMUM AMOUNT: not less than one-twelfth of the

PD 851
total basic salary earned by an employee within a
calendar year. For the year 1987, the computation of

(Requiring All the 13th month pay shall include the cost of living
allowances (COLA) integrated into the basic salary of a
Employers To Pay covered employee pursuant to Executive Order 178.

Their Employees A ● "basic salary" = includes all remunerations or earning

13th-month Pay), as paid by this employer for services rendered but does
not include allowances and monetary benefits which
amended by are not considered or integrated as part of the regular

Memorandum Order or basic salary, such as the cash equivalent of unused

vacation and sick leave credits, overtime, premium,
No. 28 night differential and holiday pay, and cost-of-living
allowances. However, these salary-related benefits
should be included as part of the basic salary in the
computation of the 13th month pay if by individual or
collective agreement, company practice or policy, the
same are treated as part of the basic salary of the
employees.
 ● TIME OF PAYMENT: shall be paid not later than

PD 851
December 24 of each year. An employer, however,
may give to his employees one half (½) of the
(Requiring All required 13th month pay before the opening of the
regular school year and the other half on before the
Employers To Pay 24th of December of every year. The frequency of
Their Employees A payment of this monetary benefit may be the
subject of agreement between the employer and
13th-month Pay), as the recognized/collective bargaining agent of the
amended by employees.

Memorandum Order ● NON-INCLUSION IN REGULAR WAGE: The

No. 28 mandated 13th month pay need not be credited as
part of regular wage of employees for purposes of
determining overtime and premium pays, fringe
benefits insurance fund, Social Security, Medicare
and private retirement plan.
 “The following income payments are exempted from

RR 11-2018,
the requirement of withholding tax on compensation
BUT may be subject to income tax depending on the
Sec. 6(B)(11) nature/sources of income earned by the individual
recipient.

x x x

11. Thirteenth month pay and other benefits -

a. Thirteenth month pay equivalent to the

mandatory one (1) month basic salary of official
and employees of the government (whether
national or local), including government-owned
or controlled corporations, and/or private offices
received after the twelfth month pay; and
 (cont.)

RR 11-2018, b. Other benefits such as Christmas bonus,

Sec. 6(B)(11) productivity incentives, loyalty award, gift in
cash or in kind, and other benefits of similar
nature actually received by officials and
employees of both government and private
offices, including the Additional Compensation
Allowance (ACA) granted and paid to all officials
and employees of the National Government
Agencies (NGAs) including State Universities
and Colleges (SUCs), Government-Owned
and/or Controlled Corporations (GOCCs),
Government Financial Institutions (GFIs) and
Local Government Units (LGUs).
 (cont.)

RR 11-2018, The above stated exclusions under (a) and (b) shall
Sec. 6(B)(11) cover benefits paid or accrued during the year,
provided that the total amount shall not exceed
ninety thousand pesos (₱ 90,000), which may be
increased through rules and regulations issued by the
Secretary of Finance, upon recommendation of the
Commissioner, after considering among others, the
effect on the same of the inflation rate at the end of
the taxable year.”
Fringe Benefits Tax
Sec. 33, NIRC
 Any good, service, or other benefit furnished or granted in
cash or in kind by an employer to an individual employee

FRINGE
(except rank-and-file employees as defined herein) such
as, but not limited to, the following:

BENEFIT, 1. Housing
2. Expense Account

DEFINED
3. Vehicle of any kind
4. Household personnel (such as maid, driver, others)
5. Interest on loan at less than market rate to the extent of
the difference between the market rate and actual rate
granted
Sec. 33 (B), NIRC / 6. Membership fees, dues, and other expenses borne by
the employer for the employee in social and athletic clubs
RR 8-2018 / or other similar organizations
7. Expenses for foreign travel
RR 11-2018 8. Holiday and vacation expenses
9. Educational assistance to the employee or his
dependents
10. Life or health insurance and other non-life insurance
premiums or similar amounts in excess of what the law
allows.
NOTES:

● List of fringe benefits in Sec. 33(B) is NOT exclusive

● Fringe benefits in Sec. 33(B) do NOT include any good,

service, or other benefit furnished or granted in cash or in
kind by an employer to rank-and-file employees
 “Managerial employee” is one who is
Labor Code, vested with the powers or prerogatives to

Art. 212 (m) lay down and execute management

policies and/or to hire, transfer, suspend,
lay-off, recall, discharge, assign or
discipline employees. Supervisory
employees are those who, in the interest
of the employer, effectively recommend
such managerial actions if the exercise of
such authority is not merely routinary or
clerical in nature but requires the use of
independent judgment. All employees not
falling within any of the above definitions
are considered rank-and-file employees
for purposes of this Book.
RR 3-98
“Coverage — These Regulations shall
cover only those fringe benefits given or
furnished to managerial or supervisory
employees and not to the rank and file.

The term, ‘RANK AND FILE EMPLOYEES’

means all employees who are holding
neither managerial nor supervisory
position. x x x ”
TAX RATE AND TAX BASE:

FOR FOR MANAGERIAL/

RANK-AND-FILE SUPERVISORY
EMPLOYEES: EMPLOYEES:

0% 35%
Based on grossed-up Based on grossed-up
monetary value (GMV) of monetary value (GMV) of
fringe benefits fringe benefits
 1. Housing
2. Expense Account
FRINGE 3. Vehicle of any kind
4. Household personnel (such as maid, driver,

BENEFIT,
others)
5. Interest on loan at less than market rate to
the extent of the difference between the market
INCLUSIONS rate and actual rate granted
6. Membership fees, dues, and other expenses

(not exclusive) borne by the employer for the employee in

social and athletic clubs or other similar
organizations
7. Expenses for foreign travel
Sec. 33 (B), NIRC 8. Holiday and vacation expenses
9. Educational assistance to the employee or his
dependents
10. Life or health insurance and other non-life
insurance premiums or similar amounts in
excess of what the law allows.
 1. Fringe benefits authorized and
exempted from tax under special laws
FRINGE 2. Contributions of the employer for the
BENEFIT, benefit of the employee to retirement,
insurance and hospitalization benefit
EXCLUSIONS plans

3. Benefits given to rank-and-file

employees, whether granted under a CBA
Sec. 33 (C) , NIRC or not

4. De minimis benefits* as defined in the

rules and regulations to be promulgated
by the Secretary of Finance, upon
recommendation of the Commissioner.

*to be discussed infra

FRINGE “Fringe benefits, however,
which are required by the
BENEFIT, nature of or necessary to the
EXCLUSIONS trade, business or profession
(additional) of the employer, or where such
fringe benefit is for the
convenience and advantage of
Sec. 1(G), RR 11-2018,
Sec. 33(A), NIRC the employer shall not be
subject to the fringe benefit
tax.”
 “Effective January 1, 2018 and onwards, a final tax of thirty-five
percent (35%) is hereby imposed on the grossed-up monetary

IMPOSITION OF
value of fringe benefit furnished or granted to the employee
(except rank and file employees as defined herein) by the

TAX ON FRINGE
employer, whether an individual or a corporation (unless the
fringe benefit is required by the nature of, or necessary to the
trade, business or profession of the employer, or when the fringe
BENEFITS benefit is for the convenience or advantage of the employer). The
tax herein imposed is payable by the employer which tax shall be
paid in the same manner as provided for under Section 57(A) of
this Code. The grossed-up monetary value of the fringe benefit
shall be determined by dividing the actual monetary value of the
Sec. 33(A), NIRC fringe benefit by sixty five percent (65%) effective January 1,
2018 and onwards: Provided, however, That fringe benefit
furnished to employees and taxable under Subsections (B), (C),
(D), and (E) of Section 25 shall be taxed at the applicable rates
imposed thereat: Provided, further, That the grossed-up value of
the fringe benefit shall be determined by dividing the actual
monetary value of the fringe benefit by the difference between
one hundred percent (100%) and the applicable rates of income
tax under Subsections (B), (C), (D), and (E) of Section 25.”
 “On the grossed-up monetary value of the fringe benefits
granted or furnished by the employer to his employees

IMPOSITION OF
(except rank-and-file as defined in the Code).-

Employee is a citizen/resident alien/non-resident alien

TAX ON FRINGE engaged in trade or business within the Philippines -
Thirty-five percent (35%)
BENEFITS Employee is a non-resident alien not engaged in trade
or business within the Philippines - Twenty-five percent
(25%)

RR 11-2018(G) The grossed-up value of the fringe benefit shall be

determined by dividing the actual monetary value of the
fringe benefit by the difference between one hundred percent
(100%) and the applicable rate of income tax. The actual
monetary value of the fringe benefit shall be divided by
sixty-five percent (65%) to get the grossed-up value subject
to 35% fringe benefit tax (FBT); while the divisor shall be
seventy five percent (75%) to get the grossed-up value
subject to 25% FBT. x x x”
IMPOSITION OF TAX ON FRINGE BENEFITS
FILIPINO ALIEN

Resident Non-Resident Resident Non-Resident Non-Resident

doing not doing
business business

Rank-and-File 0% GMV 0% GMV 0% GMV 0% GMV 0% GMV

Managerial/ 35% GMV 35% GMV 35% GMV 35% GMV 25% GMV
Supervisory (Sec 25(B))

15% GMV*
(Sec 25(CDE))

*Vetoed by President
GMV = grossed-up monetary value of fringe benefit
GROSSED-UP MONETARY VALUE (RR 6-98)

The grossed-up monetary value of the fringe benefit represents:

● the whole amount of income realized by the employee which

includes:
○ the net amount of money or net monetary value of property
which has been received, plus
○ the amount of fringe benefit tax thereon otherwise due
from the employee but paid by the employer for and in
behalf of his employee
HOW TO DETERMINE GMV:
Sec. 33, NIRC - Divide the actual monetary value of the fringe
benefit by 65%

RR 11-2018 - Divide the actual monetary value of the fringe benefit

by the difference between 100% and the applicable rate of income
tax (NOT a flat 65% anymore - can be 75%)

Ex. Actual monetary value: P100,000

GMV = P100,000 / .65 = P153,846.15

Illustration*:

MRU Company, a domestic employer/company, granted Ms. MHLCO, a Filipino

branch manager employee, in addition to her basic salaries, P5,000 cash per
quarter for her personal membership fees at Country Golf Club.

Fringe Benefits Tax (FBT) = (Monetary value of fringe benefit / 65%) x 35%
= (P5,000 / .65) x .35
= P7,692.31 x .35
= P2,692.31

*from RR 8-2018
Illustration*:

MRU Company, a domestic employer/company, granted Mr. XYZ, a

non-resident alien individual not engaged in trade or business within PH, in
addition to his basic salaries, P5,000 cash per quarter for his personal
membership fees at Country Golf Club.

Fringe Benefits Tax (FBT) = (Monetary value of fringe benefit / 75%) x 25%
= (P5,000 / .75) x .25
= P6,666.67 x .25
= P1,666.67

*from RR 8-2018
NOTES:

● The employer shoulders the FBT of the managerial/ supervisory

employee. But the law allows him to deduct such tax from his
gross income. (Sec. 33(A), in relation to Sec. 57 and 58, NIRC)

● Fringe benefits given to a rank-and-file employee, although

exempt from Fringe Benefits Tax, are still treated as part of his
compensation income subject to NORMAL TAX RATE and
withholding tax on compensation income, except de minimis
benefits and benefits provided for the convenience of the
employer.
VALUATION OF SPECIFIC TYPES OF
FRINGE BENEFITS
RR 3-98
 HOUSING PRIVILEGE FRINGE BENEFIT TAX BASE (MONETARY VALUE)

Employer leases property used as a residence of the employee 50% of the monthly rental paid

Employer owns the property and assigns it to the employee as his (5% of FMV or zonal value) x 50%
usual residence

Employer purchases residential property on installment and allows 50% x (5% of acquisition cost)
the employee to use it

Employer purchases property and transfers ownership to the Acquisition cost or zonal value, whichever is higher
employee

Employer purchases property and transfers ownership to the FMV or Zonal value – Cost to the employee
employee at a price less than acquisition cost

Housing of Military Officials Exempt

Housing which is situated inside or adjacent to the premises of a Exempt

business or factory (within 50 meters)

Temporary housing for employee who stays for not more than 3 Exempt
months

HOUSING PRIVILEGE
 EXPENSE ACCOUNT SUBJECT TO FBT?
Expenses incurred by the employee, but paid by the YES
employer
Expenses incurred by the employee, duly receipted for NO
and in the name of the employer, and the expense is
not in the nature of a personal expense attributable to
the employees
Personal expenses, such as groceries, paid for or YES
reimbursed by the employer, even if these are duly
receipted for in the name of the employer
Representation and Transportation Allowance which NO. BUT treated as compensation income,
are fixed in amount & regularly given as part of monthly EXCEPT if ordinary and necessary to the
compensation business of the employer

EXPENSE ACCOUNT
 MOTOR VEHICLES MONETARY VALUE
Employer purchases vehicle in the name of the employee, Acquisition cost
regardless of usage of the vehicle
Employer provides cash for the purchase of a motor vehicle, Amount paid in cash by the employer
where ownership transfer to the employee
Employer purchases the vehicle on installment, and transfers Acquisition cost (minus interest) divided by five
ownership years
Employer shoulders a portion of the purchase price Amount shouldered
Employer owns & maintains a fleet of vehicles for the use of the 50% x (Acquisition cost of vehicles not normally
business and the employees used for sales, freight, delivery service and other
non-personal uses divided by five years)
Employer leases & maintains a fleet of vehicles for the use of the 50% of Rental payments
business and the employees
Aircraft (including helicopters) Exempt
Yacht Value based on depreciation at estimated useful
life of 20 years

MOTOR VEHICLES
Expenses of the employee which are borne by the
employer for household personnel, such as salaries of
household help, personal driver of the employee, or other
similar personal expenses (like payment for homeowners
association dues, garbage dues, etc.) shall be treated as
taxable fringe benefits.

HOUSEHOLD EXPENSES
 If the employer lends money to his employee free from
interest or at a rate lower than twelve per cent (12%),
such interest foregone by the employer or the difference
of the interest assumed by the employee and the rate of
twelve per cent (12%) shall be treated as a taxable fringe
benefit.

*Applies to installment payments or loans with interest rate lower

than twelve per cent (12%) starting January 1, 1998.

INTEREST ON LOAN AT LESS THAN MARKET VALUE

 These expenditures shall be treated as taxable fringe
benefits of the employee in full.

MEMBERSHIP FEES, DUES, AND OTHER EXPENSES IN SOCIAL AND

ATHLETIC CLUBS OR OTHER SIMILAR ORGANIZATIONS
 EXPENSES FOR FOREIGN TRAVEL MONETARY VALUE
Reasonable expenses for the purpose of attending Exempt
business meetings or conventions
Inland travel expenses (food, beverages, Exempt
transportation) not more than $300/day
Economy and business class ticket Exempt
First class ticket 30% of cost
No documentary evidence showing that foreign Entire cost of ticket, hotel
travel was in connection with business meetings or accomodations and other expenses
conventions incident thereto
Travel expenses of family members of the employee Full cost

EXPENSES FOR FOREIGN TRAVEL

Holiday and vacation expenses of the employee borne by
his employer shall be treated as taxable fringe benefits.

HOLIDAY AND VACATION EXPENSES

 EDUCATIONAL ASSISTANCE MONETARY VALUE
In general Cost of assistance
IF the employee was granted a scholarship by the Exempt
employer and the education or study is directly
connected to the trade or business of the
employer, and there is a written contract that the
employee must remain in employ for a period of
time
Educational assistance extended to dependents Cost of assistance
IF the assistance was extended to the employee’s Exempt
dependents and was provided through a
scholarship program of the company

EDUCATIONAL ASSISTANCE
 LIFE OR HEALTH INSURANCE, ETC MONETARY VALUE
PREMIUMS IN EXCESS OF WHAT THE
LAW ALLOWS
In general Cost of excess
Contribution is pursuant to existing Exempt
law such as to the GSIS or SSS
Group insurance Exempt

LIFE OR HEALTH INSURANCE, ETC.

Other Benefits Excluded from
Gross Income
Sec. 33(C)
FRINGE “Fringe benefits, however,
which are required by the
BENEFIT, nature of or necessary to the
EXCLUSIONS trade, business or profession
of the employer, or where such
fringe benefit is for the
convenience and advantage of
Sec. 1(G), RR 11-2018,
Sec. 33(A), NIRC the employer shall not be
subject to the fringe benefit
tax.”
Those benefits which do not redound to the benefit
of the employee, or are retained by him are not
included in the computation of gross income.
[Collector v. Henderson]
Q: A works as an Accounts VP for a popular advertising firm.
She was given a unit in One Roxas Triangle for the sole
purpose of hosting parties for clients from abroad. Is the
benefit supposed to be taxed?

A: No. The benefit redounds solely to the employer of A,

therefore it cannot be part of the computation of Gross
Income.
 1. Fringe benefits authorized and
exempted from tax under special laws
FRINGE 2. Contributions of the employer for the
BENEFIT, benefit of the employee to retirement,
insurance and hospitalization benefit
EXCLUSIONS plans

3. Benefits given to rank-and-file

employees, whether granted under a CBA
Sec. 33 (C) , NIRC or not

4. De minimis benefits as defined in the

rules and regulations to be promulgated
by the Secretary of Finance, upon
recommendation of the Commissioner.
EXEMPT UNDER SPECIAL LAWS [Sec 33(C)]

Under the Personal Equity and Retirement Account

(PERA) Law, contributions from an employer to an
employee’s account are not taxable.

R.A 9505; RR 17-2011

CONTRIBUTIONS TO RETIREMENT, INSURANCE, AND
HOSPITALIZATION BENEFIT PLANS [Sec 33(C)]

Retirement benefits, insurance and hospitalization

plans have specific tax treatments under Sec. 32(B),
which deals with exclusions from Gross Income.
BENEFITS TO RANK AND FILE EMPLOYEES [Sec 33(C)]

Benefits rank and file employees receive are not

fringe benefits but are considered allowances which
are treated as part of compensation income.
 The term "DE MINIMIS" benefits
which are exempt from the fringe
DE MINIMIS benefit tax shall, in general, be
limited to facilities or privileges
BENEFITS furnished or offered by an
employer to his employees that are
of relatively small value and are
offered or furnished by the
RR 6-98
employer merely as a means of
promoting the health, goodwill,
contentment, or efficiency of his
employees.
 Facilities and privileges (such as
entertainment, medical services, or
so-called “courtesy discounts on

DE MINIMIS purchases), otherwise known as “de

minimis benefits” furnished or offered

BENEFITS by an employer to his employees, are

not considered as compensation
subject to income tax and
consequently to withholding tax, if
such facilities or privileges are of
RR 10-08
relatively small value and are offered or
furnished by the employer merely as a
means of promoting the health,
goodwill, contentment, or efficiency of
his employees.
 DE MINIMIS BENEFITS
RR 5-2011 and RR 1-2015 (added K) RR 11-2018 Section 6 (A)(3) amended A-E

The following shall be considered as “de minimis” benefits not subject to income tax as well as
withholding tax on compensation income of both managerial, and rank and file employees:
a) Monetized unused vacation leave credits of private employees not exceeding ten (10) days
during the year;
b) Monetized value of vacation and sick leave credits paid to government officials and employees;
c) Medical cash allowance to dependents of employees, not exceeding ₱1,500 per employee per
semester of ₱250 per month;
d) Rice subsidy of ₱2,000 or one sack of 50kg. rice per month amounting to not more than ₱2,000;
e) Uniform and clothing allowance not exceeding ₱6,000 per annum;
f) Actual medical assistance, e.g. medical allowance to cover medical and healthcare needs,
annual medical/executive check-up, maternity assistance, and routine consultations, not exceeding
P10,000 per annum
 DE MINIMIS BENEFITS
RR 5-2011 and RR 1-2015 (added K) RR 11-2018 Section 6 (A)(3) amended A-E

g) Laundry allowance not exceeding P300 per month;

h) Employees achievement awards, e.g. for length of service or safety achievement, which must
be in the form of a tangible personal property, other than cash or gift certificate, with an annual
monetary value not exceeding P10,000 received by the employee under an established written
plan which does not discriminate in favor of highly paid employees;
i) Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per
employee per annum;
j) Daily meal allowance for overtime work and night/graveyard shift not exceeding 25% of the
basic minimum wage on a per region basis;
k) Benefits received by an employee by virtue of a CBA and productivity incentive schemes
provided that the total annual monetary value received from both CBA and productivity incentive
schemes combined do not exceed P10,000 per employee per taxable year;
THIS IS AN EXCLUSIVE LIST (as per RR 5-2011)

“All other benefits given by employers which are not

included in the above enumeration shall not be
considered as “de minimis” benefits, and hence, shall
be subject to income tax as well as withholding tax on
compensation income.”

RR 5-2011 and RR 1-2015 (added K) RR 11-2018 Section 6 (A)(3) amended A-E

Illustration:

Mr. X received the following from his employer, A Company, for the taxable
year

Basic Salary = P650,000

13th month pay = P55,000
Clothing allowance = P3,000
Productivity bonus = P15,000
Christmas bonus = P15,000
Rice Subsidy = P2,000
(RECALL) Sec. 32(B)(7)(e):

Gross benefits received by officials and employees of public and private entities:
Provided, however, That the total exclusion under this subparagraph shall not exceed
P90,000 which shall cover:

i) Benefits received by officials and employees of the national and local government
pursuant to Republic Act No. 6686

ii) Benefits received by employees pursuant to Presidential Decree No. 851, as

amended by Memorandum Order No. 28, dated August 13, 1986

iii) Benefits received by officials and employees not covered by Presidential Decree No.
851, as amended by Memorandum Order No. 28, dated August 13, 1936; and

iv) Other benefits such as productivity incentives and Christmas bonus

The tax treatment is as follows
SOURCE AMOUNT TREATMENT

Basic Salary P650,000 Taxed as compensation income

13th Month Pay 55,000 Exempt

Clothing Allowance 3,000 Exempt

Productivity Bonus 15,000 10,000 exempt; 5,000 added to 13th month pay, other bonuses

Christmas bonus 15,000 5,000 Exempt, P10,000 added to 13th month pay, other bonuses

Rice Subsidy 2,000 Exempt

The total excess of the De minimis benefits is P15,000. Added to the 13th month pay,
the total benefits amount to P70,000.00, which is still below the ceiling provided under
Sec. 32(B).
IF Mr. X received an additional P30,000 bonus, leaving him with an excess P10,000
above the ceiling, the excess becomes taxable.
SUMMARY
13TH MONTH PAY ● Excluded from gross income UP
TO P 90,000
AND OTHER ● Included in the P 90,000:
BENEFITS ○ 13th month pay
○ Other benefits such as
Christmas bonus,
productivity incentives,
loyalty award, gift in cash or
kind, and similar benefits
 ● WHO ARE TAXED: managerial and

FRINGE supervisory employees

○ BUT SHOULDERED BY:
BENEFITS employers
TAX ○ Rank-and-file employees not
subject to FBT, but to ordinary
income tax
● TAX RATE: 35% or 25% (for
NRANDB)
● TAX BASE: Grossed-up market
value (GMV)
○ For the net monetary value,
take note of special treatments
for specific fringe benefits in
RR 3-98
OTHER BENEFITS ● Fringe benefits REQUIRED by the
nature of the business or are FOR
EXCLUDED FROM THE CONVENIENCE or advantage of

GROSS INCOME ●
the employer are excluded.
Exempt under SPECIAL laws (ex.
PERA Law)
● CONTRIBUTIONS of the employer for
the employee to retirement,
insurance, hospitalization benefit
plans
● Benefits given to RANK AND FILE
employees
● DE MINIMIS Benefits: Privileges of
small value furnished by the
employer.
-END-