BIR Ruling [DA-266-04]

May 17, 2004 BIR RULING [DA-266-04] RR 8-2000 DA-011-2004 Office of the Ombudsman Agham Road, Government Center North Triangle, Diliman Quezon City Attention: Atty. Paul Elmer M. Clemente Director, Office of Legal Affairs Gentlemen : This refers to your letter dated January 30, 2004 requesting for a ruling on whether the Basic Cash Gift of Php5,000.00 and Extra Cash Gift of Php5,000.00 forms part of the "other benefits" under Section 32(B)(7)(e) of the Tax Code of 1997 or whether it forms part of the "gifts given during Christmas and major anniversary celebrations" ( de minimis benefits) under Section 2.33(C), Revenue Regulations No. 8-2000, as amended, implementing Section 33 of the same Code. In reply, please be informed that facilities or privileges that are categorized as de minimis benefits under pertinent rules and regulations shall not be included as items of gross income for income tax purpose. They shall not also be included in the computation of the Php30,000.00 threshold for the determination of the income that are to be excluded from income under Section 32(B)(7)(e) of the Tax Code of 1997. Corollary to this, de minimis benefits are neither subject to income tax on compensation nor to the fringe benefits tax. Furthermore, no withholding tax thereon shall be imposed in view of their exclusion and exemption from tax. Hence, no withholding tax on compensation income thereon of both managerial and rank and file employees shall be imposed in view of their exclusion and exemption from tax. ( BIR Ruling No. DA-011-2004 dated January 8, 2004 ) The "other benefits" referred to in Section 32(B)(7)(e)(iv) of the Tax Code of 1997 include benefits, other than the 13th month pay, such as, the annual Christmas bonus given by private entities, 14th month pay and the like, gifts in cash or in kind and other similar benefits and refer to those benefits received by an employee in a calendar year. Accordingly, the Php5,000.00 extra cash gift given to your employees which is given during Christmas on top of the Php5,000.00 Basic Cash Gift which is also given during Christmas or a total of Php10,000.00 are de minimis fringe benefits, and therefore, tax exempt. However, since the ceiling for gifts given during Christmas and major anniversary celebrations is fixed at Php5,000.00, the excess over the Php5,000.00 ceiling amount of the de minimis fringe benefits shall be considered as "other benefits" under Section 32(B)(7)(e)(iv) of the Tax Code of 1997. The excess of the gifts during Christmas over the de minimis ceiling shall be exempt provided that it, together with the total amount of other benefits, shall not exceed Php30,000.00 ( BIR Ruling No. 23-2002 dated June 21, 2002 and BIR Ruling No. DA-011-2004 dated January 8, 2004 ) 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. cDTACE Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group