BIR Ruling [DA-053-01]

March 28, 2001 BIR RULING [DA-053-01] R.R. 3-98; RR 2-98 DA-127-2000 James Hardie Philippines, Inc . Brgy. San Isidro, Cabuyao Laguna, 4205 Philippines Attention: Ms . Loudelle D . Cinco Accounting Manager Gentlemen : This refers to your letter dated March 30, 2000 requesting for a ruling on whether the grant of rice allowance by your company to its employees is exempt from the Fringe Benefit Tax (FBT). It is represented that your company intends to provide all your employees with rice allowance of P1,300.00 per quarter (effectively P433.33 per month) regardless of ranking and position i.e. including supervisors and managers; and that on a quarterly basis, you will include in the employees payroll the P1,300.00 as rice allowance. Based on the foregoing, you now request for a ruling on the following: "1. For supervisors and managers, can we request that the total amount of rice allowance of P1,300.00 per quarter or P433.33 per month be considered as "De Minimis", that is, will not be subject to Fringe Benefit Tax considering the current cost of one sack of rice? "2. For rank and file employees, how would we treat the P 1,300.00 rice allowance per quarter? Would this fall under the benefit of relatively small value exempt from withholding tax on compensation? Or would it be part of their compensation income subject to tax. If yes, then that would bring us to our next question. "3. What would you suggest is the best set up in order for our employees, especially the rank and file, to think that the company is fair to all?" In reply, please be informed that pursuant to Section 2.78.1 (A)(3) of Revenue Regulations No. 2-98, facilities and privileges (such as entertainment, medical services, or so called "courtesy" discounts on purchases), furnished or offered by an employer to his employees generally, are not considered as compensation subject to withholding tax if such facilities or privileges are of 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. Moreover, pursuant to Section 33 (C) of the Tax Code of 1997 as implemented by Section 2.33 (C) of Revenue Regulations No. 3-98, pertinent provision of which reads as follows: "SEC. 2.33. SPECIAL TREATMENT OF FRINGE BENEFITS "(A) xxx xxx xxx "(B) xxx xxx xxx "(C) Fringe Benefits Not Subject to Fringe Benefits Tax - In general, the benefits tax shall not be imposed of the following fringe benefits: "(1) Fringe benefits which are authorized and exempted from income tax under the Code or under any special law; "(2) Contributions of the employer for the benefit of the employee to retirement, insurance and hospitalization benefit plans; "(3) Benefits given to rank and file, whether granted under a collective bargaining agreement or not; "(4) De minimis benefits as defined in these Regulations; "(5) If the grant of fringe benefits to the employee is required by the nature of, or necessary to the trade, business or profession of the employer, or "(6) If the grant of the benefit is for the convenience of the employer ." (Emphasis supplied) Section 2.78.1. of Revenue Regulations No. 8-2000, implementing Section 33 of the Tax Code of 1997, further provides that "de minimis" benefits are exempt from the fringe benefit tax. (1) Monetized unused vacation leave credits of employees not exceeding ten (10) days during the year, (2) Medical cash allowance to dependents of employees not exceeding P750 per employee per semester or P125 per month; (3) Rice subsidy of P1,000 or one (1) sack of 50-KG . rice per month amounting to not more than P1,000 . 00 ; (Emphasis ours) (4) Uniforms and clothing allowance not exceeding P3,000 per annum; (5) Actual yearly medical benefits not exceeding P10,000 per annum; (6) Laundry allowance not exceeding of P300 per month; (7) Employee 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; (8) Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per employee per annum; (9) Flowers, fruits, books or similar items given to employees under special circumstances, e.g. on account of illness, marriage, birth of a baby, etc. (10) Daily Meal Allowance for overtime work not exceeding twenty five percent (25%) of the basic minimum wage. In view of the foregoing provisions, your queries are answered as follows: 1. Rice allowance granted to the supervisors and managers of James Hardie Philippines, Inc. in the amount of P1,300 per quarter is considered as a "de minimis" benefit and therefore, not subject to the Fringe Benefit Tax under Section 33 of the Tax Code of 1997. 2. Rice allowance granted by James Hardie Philippines, Inc. to its rank and file employees in the amount of P1,300 per quarter, is likewise, considered as of relatively small value, and is offered or furnished by the employer merely as a means of promoting the health, goodwill, contentment or efficiency of his employees. (BIR Ruling DA-127-2000 dated March 01, 2000) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) MILAGROS V. REGALADO Acting Assistant Commissioner Legal Service