Monde Nissin Corporation

May 16, 2007 BIR RULING [DA-303-07] R.R. 8-2000 Monde Nissin Corporation 22/F, 6750 Office Tower Ayala Avenue Makati City Attention: Ms. Corazon Sy Gonzales Personnel & Admin. Manager Gentlemen : This refers to your letter dated February 17, 2007 requesting for clarificatory ruling on whether the "gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per employee per annum" under Revenue Regulations (RR) No. 10-2000 may be given in the form of cash or gift certificate. In reply, please be informed that Sections 2.78.1(A)(3) and (B)(11)of RR 2-98, as amended by RR 8-2000 and 10-2000 provides, viz: Sec. 2.78.1. Withholding of Income Tax on Compensation Income. (A) Compensation Income Defined In general, the term "compensation" means all remuneration for services performed by an employee for his employer under an employer-employee relationship, unless specifically excluded by the Code. The name by which the remuneration for services is designated is immaterial. Thus, salaries, wages, emoluments and honoraria, allowances, commissions (e.g. transportation, representation, entertainment and the like); fees including director's fees, if the director is, at the same time, an employee of the employer/corporation; taxable bonuses and fringe benefits except those which are subject to the fringe benefits tax under Sec. 33 of the Code; taxable pensions and retirement pay; and other income of a similar nature which constitute compensation income. xxx xxx xxx (1) Compensation paid in kind. . . . Where compensation is paid in property other than money, the employer shall make necessary arrangements to ensure that the amount of the tax required to be withheld is available for payment to the Commissioner. (2) . . . (3) Facilities and privileges of a relatively small value. Ordinarily, facilities and privileges (such as entertainment, medical services, or so called "courtesy" discounts on purchases), otherwise known as " de minimis benefits" furnished or offered by an employer to his employees, are not considered as compensation subject to income tax and consequently to withholding 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. HDcaAI The following shall be considered as " de minimis " benefits not subject to income of both managerial and rank and file employees: xxx xxx xxx (h) Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per employee per annum; xxx xxx xxx" Applying the foregoing provision, it may be gleaned that facilities and privileges or " de minimis " benefits are fringe benefits and fringe benefits are compensation. Compensation may be paid in money or property. Thus, it follows that " de minimis " benefits are compensation which may be paid in cash or in kind. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service