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Legal Updates
Revenue Regulations No. 29-2025: Increasing the Ceiling on Non-Taxable De Minimis Benefits
By: Atty. Alvin S. Siapian II
De minimis benefits refer to facilities or privileges furnished or offered by an employer to its employees that are of relatively small value and are offered or furnished by an employer merely as a means of promoting their health, goodwill, contentment, or efficiency.
Notwithstanding their modest monetary value, de minimis benefits play a meaningful role in supporting employees’ welfare and enhancing workplace morale. These benefits address employees’ day-to-day needs, ease incidental personal expenses arising from employment, and foster a sense of recognition and care from employer. By contributing to employees’ physical well-being, convenience, and peace of mind, de minimis benefits help sustain productivity, encourage loyalty, and promote positive working environment.
Recognizing their social and economic value, the National Internal Revenue Code of 1997, as amended (Tax Code) and relevant revenue regulations issued by Department of Finance (DOF) provide that de minimis benefits are not subject to income tax, as well as withholding tax on compensation, whether granted to managerial/supervisory or rank-and-file employees, provided that such benefits remain within the ceilings prescribed under applicable regulations.
As a welcome development, on October 27, 2025, DOF, upon recommendation of the Bureau of Internal Revenue (BIR), issued Revenue Regulations (“RR”) No. 29-2025, which constitutes a significant improvement in this regard by increasing the allowable ceiling for non-taxable de minimis benefits.
This regulatory adjustment affords employers greater flexibility in extending employee benefits while maintaining tax efficiency, and correspondingly allows employees to enjoy non-taxable benefits.
Changes in the Ceiling of De Minimis Benefits
RR No. 29-2025 adjusts the ceilings for de minimis benefits, superseding the limits previously prescribed under earlier RRs. The principal amendments are summarized as follows:
De Minimis Benefits | Previous RRs | RR No. 29-2025 | Increase in benefits |
Monetized unused vacation leave credits of private employees | Not exceeding ten (10) days during the year | Not exceeding twelve days (12) during the year | Two (2) days |
Monetized value of vacation and sick leave credits paid to government officials and employees | No limit | No change | No increase |
Medical cash allowance to dependents of employees | Not exceeding P1,500.00 per employee per semester, or P250.00 per month. | Not exceeding P2,000.00 per employee per semester, or P333 per month | P 500.00 per employee per semester, or P83.00 per month |
Rice subsidy | P2,000.00, or one sack of 50 kg rice per month amounting to not more than P2,000.00 | P2,500.00, or one (1) sack of 50 kg rice per month, amounting to not more than P2,500.00 | P500 pesos per month |
Uniform and clothing allowance | Not exceeding P7,000.00 per annum | Not exceeding P8,000.00 per annum | P1,000 per annum |
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 P10,000.00 per annum | Not exceeding P12,000 per annum | P2,000.00 per annum |
Laundry allowance | Not exceeding P300.00 per month | Not exceeding P400.00 per month | P100.00 per month |
Employees’ achievement awards, e.g. for length of service or safety achievement, in any form, whether in cash, gift certificate, or any tangible personal property received by the employee under an established written plan which does not discriminate in favor of highly paid employees | Annual monetary value not exceeding P10,000.00 | Annual monetary value not exceeding P12,000.00 | Annual monetary value of P2,000.00 |
Gifts given during Christmas and major anniversary celebrations | Not exceeding P5,000.00 per annum | Not exceeding P6,000.00 per annum | P1,000.00 per annum |
Daily meal allowance for overtime work and night/graveyard shift | Not exceeding twenty five percent (25%) of the basic minimum on a per region basis | Not exceeding thirty percent (30%) of the basic minimum wage on a per region basis | Not exceeding five percent (5%) on a per region basis |
Benefits by an employee by virtue of a collective bargaining agreement (CBA) and productivity incentives schemes combined | Not exceeding ten thousand pesos (P10,000.00) per employee per taxable year | Not exceeding twelve thousand pesos (P12,000.00) per employee per taxable year | P2,000.00 per employee per taxable year |
Practical insights on the changes in the De Minimis Benefits
A. Monitoring and Documentation
De minimis benefits, as mentioned earlier, are not subject to income tax or withholding tax on compensation regardless of the employee who received the benefits. As such, their non-taxable status is interpreted strictly against the taxpayer and liberally in favor of the government. Compliance with all legal requirements is therefore essential to ensure that these benefits are properly recognized as not subject to income tax or withholding tax.
It is important to note that monitoring and documentation of de minimis benefits granted to employees must be thorough, accurate, and consistently maintained. Documents such as, but not limited to, approved board resolutions authorizing such benefits, written company policies or internal memoranda detailing the benefits, payroll records, vouchers or receipts, and employee acknowledgment receipts, serve as critical evidence in substantiating the benefits during BIR audits. Accordingly, such documentation should be preserved in an orderly and comprehensive manner to demonstrate compliance and uphold the non-taxable treatment of de minimis benefits before the BIR.
B. Payroll Reconfiguration
With revisions to the ceilings for de minimis benefits, the payroll system must be updated to reflect the new limits. This update is particularly important for taxpayers using a BIR-registered Computerized Accounting System (“CAS”), as under Revenue Memorandum Circular No. 5‑2021, any modifications that directly affect the financial aspects of a registered CAS are considered major system enhancements which require registration with the BIR.
C. Maximizing Tax-Efficient Employee Benefits Under the New Thresholds
The revised ceilings enable employers to optimize employee compensation in a tax-efficient manner. Designing benefits within these thresholds enhances employee satisfaction, ensures prudent management of payroll costs, and preserves full tax advantages.
Effectivity of RR No. 29-2025
Some companies often question the application of the new RR in payroll administration, particularly in connection with year-end annualization to determine the total tax due for 2025.
Pursuant to Section 3 of RR No. 29‑2025, the regulation takes effect fifteen (15) days after its publication in the Official Gazette or on the BIR website, whichever comes first. Given that the said RR was published on December 22, 2025, it shall become effective on January 6, 2026.
Consequently, in the computation of de minimis benefits for 2025 taxable year, the existing ceilings under prior regulations shall continue to apply. The revised thresholds prescribed under RR No. 29‑2025 shall only be applicable prospectively beginning with the 2026 taxable year.
This article is only for informational and educational purposes, and it is not intended as a legal advice or opinion. For assistance and legal queries, please contact general@srmo-law.com.