De minimis benefits are one of the most practical and tax-efficient tools available to Philippine employers. With the issuance of Revenue Regulations (RR) No. 29-2025, the Bureau of Internal Revenue updated the list and ceilings of allowable de minimis benefits to reflect rising costs and modern workplace realities.
This guide covers
- What Are De Minimis Benefits?
- Allowable De Minimis Benefits and Limits (RR 29-2025)
- Why De Minimis Benefits Matter
- Best Practices for Employers and Payroll Teams
- Common Mistakes to Avoid
- Frequently Asked Questions (FAQ)
- Are de minimis benefits mandatory?
- When is the effectivity date of RR 29-2025?
- What happens if a de minimis benefit exceeds the RR 29-2025 limit?
- Are de minimis benefits included in 13th month pay computation?
- Are de minimis benefits included in the ₱90,000 tax-exempt ceiling?
- Are de minimis benefits subject to SSS, PhilHealth, and Pag-IBIG contributions?
- Can employers choose which de minimis benefits to grant?
- What documents should employers keep to support de minimis benefits?
- Make it Easier with MPM Payroll
What Are De Minimis Benefits?
De minimis benefits are relatively small-value benefits given to employees that are excluded from taxable compensation, provided they stay within limits set by the BIR.
When properly granted, these benefits are:
- Not subject to income tax
- Not subject to withholding tax
- Not subject to fringe benefit tax
Their primary objective is to support employees without creating unnecessary tax exposure.
Allowable De Minimis Benefits and Limits (RR 29-2025)
Below is the updated list of allowable de minimis benefits and their maximum tax-exempt limits under RR 29-2025. Any excess over these limits becomes taxable compensation.
| De Minimis Benefit | Tax-Exempt Limit |
|---|---|
| Monetized unused vacation leave (private employees) | Up to 12 days per year |
| Monetized vacation and sick leave (government employees) | Fully tax-exempt |
| Medical cash allowance for dependents | Up to ₱2,000 per semester |
| Rice subsidy | Up to ₱2,500 per month or one 50-kg sack not exceeding ₱2,500 |
| Uniform and clothing allowance | Up to ₱8,000 per year |
| Actual medical assistance (check-ups, hospitalization, maternity assistance, etc.) | Up to ₱12,000 per year |
| Laundry allowance | Up to ₱400 per month |
| Employee achievement awards (cash, gift certificates, or goods under a written plan) | Up to ₱12,000 per year |
| Christmas and major anniversary gifts | Up to ₱6,000 per year |
| Daily meal allowance for overtime, night shift, or graveyard shift | Tax-exempt when reasonable and work-related |
Each benefit has its own ceiling. Limits cannot be combined or offset across different benefit types.
Why De Minimis Benefits Matter
For Employees
- Higher take-home value
- Reduced tax deductions
- Predictable, easy-to-understand benefits
For Employers
- Tax-efficient compensation structuring
- Improved employee satisfaction and retention
- Lower payroll audit risk
- Clear compliance boundaries
Best Practices for Employers and Payroll Teams
Establish clear written policies
Define eligibility, benefit limits, frequency, and treatment of excess amounts to ensure consistency and audit readiness.
Track benefits per employee on a year-to-date basis
Because many de minimis benefits have annual limits, it’s important to track year-to-date amounts per employee. Payroll systems with automatic YTD reporting help ensure limits are not exceeded.
Keep de minimis benefits separate from other allowances
Avoid lumping them under generic “Deminimis Benefits” or “Allowances” to avoid potential loss of tax-exempt status.
Maintain proper documentation
Keep payroll registers, benefit schedules, receipts, and approved award programs for BIR audit support.
Review limits regularly
BIR ceilings change over time. Review policies and payroll configurations at least once a year.
Common Mistakes to Avoid
Treating all allowances as de minimis benefits
Not all allowances qualify as de minimis benefits. De minimis benefits are also distinct from the ₱90,000 tax-exempt ceiling covering 13th month pay and other benefits and must independently meet BIR requirements and limits.
Ignoring individual benefit limits and failing to tax excess amounts
Each de minimis benefit has its own prescribed ceiling. Any amount exceeding the limit should be properly treated as taxable compensation and included in withholding tax computations.
Presenting de minimis benefits as a lump sum in payroll records
De minimis benefits should be itemized per benefit type (e.g., rice subsidy, uniform allowance, medical assistance). Lumping them into a single amount may weaken tax defensibility during audits.
Poor or incomplete documentation
Missing policies, payroll schedules, or supporting records can result in the loss of tax-exempt status during a BIR examination.
Reclassifying basic pay as de minimis benefits during year-end annualization
Reworking past payrolls to reclassify previously taxed basic pay or allowances as de minimis benefits is not recommended. These amounts have already been reported in monthly BIR Form 1601-C filings. Such reclassification may lead to penalties, back taxes, and adverse BIR audit findings. You may refer to Payroll Tax Annualization for a complete guide on annualization.
Frequently Asked Questions (FAQ)
Are de minimis benefits mandatory?
No. De minimis benefits are voluntary. Employers may choose which benefits to offer based on company policy and budget.
When is the effectivity date of RR 29-2025?
Revenue Regulations (RR) No. 29-2025 takes effect fifteen (15) days after its publication in either the Official Gazette or the Bureau of Internal Revenue official website, whichever comes first.
Based on its publication on the BIR website on 22 December 2025, RR 29-2025 became effective on:
06 January 2026
Employers should apply the updated de minimis benefits limits prospectively, starting from the effectivity date, and not retroactively to payroll periods before effectivity unless expressly allowed by the BIR.
What happens if a de minimis benefit exceeds the RR 29-2025 limit?
Only the excess portion becomes taxable compensation.
Are de minimis benefits included in 13th month pay computation?
No. De minimis benefits are separate from basic salary and are not included in the computation of 13th month pay.
De minimis benefits are classified as non-taxable benefits and do not form part of an employee’s basic pay, which is the basis for computing 13th month pay.
These benefits are not required by law to be included in 13th month pay. However, an employer may choose to include it as part of company policy or additional benefit to employees.
Refer to How to compute 13th month pay for a complete guide on 13th month pay.
Are de minimis benefits included in the ₱90,000 tax-exempt ceiling?
No. De minimis benefits are NOT included in the ₱90,000 tax-exempt ceiling for 13th month pay and other benefits, as long as they are within the BIR-prescribed de minimis limits.
The ₱90,000 ceiling applies to items such as 13th month pay, Christmas and other bonuses.
De minimis benefits are treated separately and remain fully tax-exempt on top of the ₱90,000 ceiling, provided they comply with RR 29-2025 limits.
Are de minimis benefits subject to SSS, PhilHealth, and Pag-IBIG contributions?
No. They are not included in government contribution computations.
Can employers choose which de minimis benefits to grant?
Yes. Employers may grant some, all, or none of the allowable de minimis benefits, as long as they are:
- Properly documented
- Non-discriminatory
- Within BIR-prescribed limits
What documents should employers keep to support de minimis benefits?
To support the tax-exempt treatment of de minimis benefits, employers should keep clear, consistent, and audit-ready records. At the minimum, employers should retain and include the break down of each deminimis benefits item in the following documents
- Employment contract
- Payroll registers
- Payslips
- Supporting documents or invoices for actual medical assistance granted as deminimis benefits
- Consistent BIR filings (BIR Form 1601c, 2316, 1604c, alphalist) that is also consistent with payroll registers
Make it Easier with MPM Payroll
Properly managing de minimis benefits isn’t just about knowing the rules – it’s about consistent payroll execution, clean records, and audit readiness. Misclassification, missed limits, or poor documentation often happen not because of intent, but because of manual tracking and fragmented payroll processes.
If you want an easier and more reliable way to manage de minimis benefits with clean payslips, and BIR-ready reports – consider using MPM Payroll.
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