Transcript Revenue Regulation (RR) No. 5-2011

Amendments to RR 2-98, 3-98, as last amended by
RR 5-08, with Respect to “De Minimis Benefits”
Presented by:
LILYBETH A. GANER
Revenue Officer
Assessment Division, RR 19-Davao City
De Minimis Benefits:
RR No. 10-2000 provides that the
following shall be considered as “de
minimis” benefits NOT subject to income
tax as well as withholding tax on
compensation income of both managerial
and rank and file employee:
The term “De Minimis” benefits which are
exempt from the FBT shall, in general, be limited
to facilities or privileges furnished or offered by
an employer to his employees that 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.
The following are considered as “de minimis” benefits
granted to each employee:
a.) Monetized unused vacation leave credits of
private employees not exceeding ten (10) days
during the year;
b.) Monetized value of vacation and sick leave
credits paid to the gov’t. officials and
employees;
c.) medical cash allowance to dependents of
employees not exceeding P750.00 per
employee per semester or P125 per month;
d.) rice subsidy of P1,500 or one (1) sack of 50 kg
rice per month amounting to not more than
P1,500;
e.) uniform and clothing allowance not
exceeding P4,000 per annum;
f.) 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 per
annum;
g.) laundry allowance not exceeding P300 per
month
h.)
Employees 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;
i.) Gifts given during Christmas and major
anniversary celebrations not exceeding
P5,000 per employee per annum;
j.) Daily meal allowance for overtime work
and night/graveyard shift not exceeding
twenty-five percent (25%) of the basic
minimum wage on a per region basis;
Note:
All other benefits given by
employers which are not included in the
above enumeration shall not be
considered as “de minimis” benefits, and
hence, shall be subject to income tax as
well as withholding tax on compensation
in come.*
* Means Fringe Benefit Tax
(RMC 20-11)
Guidelines: Tax treatment on Separation Benefits
received by officials and employees due to death,
sickness, or other physical disability and the
issuance of Cert. Of Tax Exemption from income
tax and withholding tax
Sec. 32(B)(6)(b) NIRC:
- any amount received by an official or employee
or his heirs
- due to death, sickness or physical disability, or
for any cause beyond the control of the
employee
- shall be excluded from gross income and
exempted from income tax
- regardless of the age or length of service
Before:
Request for rulings from the Law Division of the
National Office are secured by the separated
employees of private entities, and submit to the
employers as proof of exemption from income
and withholding tax
Now:
- Certificate of Tax Exemption shall be issued
by the Regional Director.
- However, request for ruling is still processed
in Legal Division, National Office.
Documentary Requirements:
1. Letter request (employee, heir or employer);
2. Death – Certified true copy of Death Cert.
3. Sickness/Physical Disability:
-Sworn affidavit of attending physician
and employer’s head of office or
representative;
-Clinical Record
-Laboratory examination or medical
certificate
(Checklist of Requirement)
Separation Benefit is exempt from:
- Income tax [Sec. 32(B)(6)(b) NIRC] and
-withholding tax (Sec. 79 NIRC, RR 2-98, RR 6-01, RR 12-01)
However, Income received prior to separation.
Not exempt
Private Retirement Benefit Plan Regulations
Pursuant to Sec. 79(B)

RA 4917 – exempts from all taxes the Retirement
Benefits received by officials and employees of
private firms under a reasonable private benefit
plan maintained by the employer and all
amounts received on account of involuntary
separation (death, sickness, physical disability,
any cause beyond control)
(a) The plan must be reasonable;
(b) Retiree must have been in service for at least 10
yrs and not less than 50 y.o.
(c) Retiree have not availed of the privilege
under a retirement benefit plan of the
same or another employer
-
Pension;
Gratuity;
Stock bonus;
Profit-sharing plan (contributory on noncontributory on the part of the employee
(a)
(b)
(c)
Written Program – definite provisions
essential for qualification;
Permanency – permanent and continuing
program;
Coverage:
Percentage Basis:
– must cover >=70% of all officials &
employees
- (eligibility) 70% of all officials & employees
and 80% of eligible must be covered
- Excluding:
(a) employed less than the minimum
length of time stated in the plan;
(b) works 20 hrs a week or less;
(c) seasonal employees (=<5 mos.)
(2) Classification Basis – with prescribed
classification set-up and limit coverage
* certain classification
* prescribed age
* years of employment
(should not be discriminatory)
(d) Contribution – employer, officials &
employees or both contribute to a trust fund
* with a purpose to distribute the
corpus and income of the fund in
accordance with the plan
(e) Impossibility of Diversion – the corpus or
income of the fund should not be diverted but
only for the exclusive benefit of the officials or
employees
(f) Non-discriminatory – no discrimination in
contributions or benefits;
(g) Non-forfeitures – must provide for nonforfeitable rights on benefits or amount credited
to his account;
(h) Forfeitures – must provide that forfeitures must
not be applied to increase the benefits any
employee would receive at any time prior to the
termination of the plan. Forfeited amounts must
be used to reduce the employer’s contribution
(i) Trust – retirement fund should be administered
by a trust.
INVOLUNTARY SEPARATION
all amounts of separation benefit are EXEMPT
From all terms and attachment, garnishment, levy,
seizure except to pay a debt in a criminal action
(a) Pension Plan – established plan by employer to
provide systematically for the payment of
determinable benefits after retirement
(b) Profit-sharing Plan – plan to provide for the
participation in the profits by employees or their
beneficiaries;
(c) Stock-Bonus Plan – similar to profit sharing except
that contributions by employer is not dependent on
profit. Benefits are distributable in stock.
(d) Gratuity Plan – for payment of definitely
determined benefits of the employees after
retirement. Same as pension plan but benefits
are paid immediately after retirement
(e) “at no time shall any part of the corpus or
income of the fund be used for, or diverted to,
any purpose other than for the exclusive benefit
of the said officials and employees”
- includes all objects or aims not solely
designed for the proper satisfaction of all
liabilities to employees covered by trust
(f) “for any cause beyond the control of said
official and employee” - separation was not in
his own making, not be asked for or initiated by
him
Note: Whether or not a separation is beyond the
control of the official or employee, being
essentially a question of fact, shall be determined
on the basis of the prevailing facts and
circumstances.
INVESTMENT
Generally, the fund may be used by the trustees
to purchase any investments permitted by trust
agreement. However, the exemption of the trust
income under Sec. 56(b) of NIRC may be denied if:
(a)
Lends any part of it income w/o adequate security
and reasonable rate of interest;
(b)
Pays any compensation in excess of a reasonable
allowance for salaries for other personal services
actually rendered;
(c) Makes any part of its services available on a
preferential basis;
(d) Makes any substantial purchase more than
adequate consideration in money or money’s
worth;
(e)Sells substantial part of its securities or
properties for less than money’s worth;
(f)Engages in any transaction whish results to
diversion of its income or corpus;
Determination of Qualification:
- Before availing of the privileges afforded by the
Plans, employers must submit to the CIR, fill out
the BIR Form 17.60 and accompanied by written
program constituting the plan and the trust
instrument.
Coverage of the exemption:
- RA No. 4917, June 17, 1967
(Pls. See Retirement Benefit Plan Information Sheet attached in
your hand outs)
Revocation of BIR Ruling Nos. 002-99, DA-18404, DA-569-04 and DA-087-06
BIR Ruling Nos. 002-99 dated Jan.12,1999
rendered an opinion regarding Sec 32(B)(7)(f) of
the NIRC of 1997, to wit:
“Since the law and implementing regulations
do not categorically state that the exemption
covers only the regular GSIS and Pag-Ibig
contributions, it is safe to conclude that GSIS
optional and Pag-Ibig 2 contributions are likewise
excludible from the gross income of the taxpayer
and hence, exempt from income tax”
BIR Ruling Nos. 002-99:
-being abused;
-money being invested in programs are
not being taxed;
-employers find difficulty to comply with
the withholding of the correct tax
since voluntary contributions by their
employees may not always pass thru
them
GSIS Contribution
- (RA 8291) means the amount payable to GSIS by
the member and the employer in accordance with
Sec. 5 of this Act;
- it shall be mandatory for the member and the
employer to pay the monthly contributions specified
in the following schedule;
SSS Contribution
-(RA 8292) the amount paid to the SSS by and on
behalf of the member in accordance with Sec. 18 of
this Act.
SSS Employee’s Contribution:
- (RA 8282) (a) beginning as of the last day of
the calendar month when an employee’s
compulsory coverage takes effect and every
month thereafter during his employment, the
employer shall deduct and withhold from such
employee’s monthly salary, wage, compensation
or earnings, the employee’s contribution in an
amount corresponding to his salary, wage,
compensation or earnings during the month in
accordance with the following schedule.
Philhealth Contribution
- (RA 7875) the amount paid by or in behalf of a
member to the Program for coverage, based on
salaries or wages in the case of formal sector
employees, and on household earnings and
assets, in the case of the self-employed, or on
other criteria as may be defined by the Corp.
Pag-Ibig Contribution
-(RA 9697) the amount payable to the Fund
by the members and their employers
Pag-Ibig Fund Generation and Contributions
- the money of the Fund shall be generated by
the provident savings that the covered
employees shall contribute for the purpose every
month, and the equal amounts that their
respective employers shall mandatorily
contribute.
Rates: 1% -employee’s income is <= P1,500/mo.
2% -employee’s income is >P1,500/mo
2% -employer’s share for all employees
(P5,000 max. X 2%)
RMC 27-11, RMC 53-11:
“Therefore, contributions referred to in Sec. 32(B)(7)(f)
of
the
NIRC
of
1997
cover
only
the
mandatory/compulsory contributions of the concerned
employees to SSS, GSIS, PHIC and HDMF. Thus, this
Office holds that voluntary contributions to these
institutions in excess of the amount considered
compulsory are not excludible from the gross income of
the taxpayer and hence, not exempt from Income Tax
and Withholding Tax. Consequently, the exemption from
withholding tax on compensation referred to in Sec.
2.78.1(B)(12) of RR 2-98 shall apply only to
mandatory/compulsory SSS, GSIS, Medicare and Pag-ibig
contributions”

Effectivity:
-the taxability of the voluntary contributions
of employees to SSS, GSIS, PHIV and HDM shall
apply to employees’ contributions beginning July
1, 2011
Reiteration of the Applicable Penalties for
Employers Who Fail to Withhold, Remit, Do the
Year-End Adjustment and Refund Employees of
the Excess Withholding Taxes on Compensation

Emphasize the Employers to:
1. Withhold
2. Remit
3. Do the Year-End Adjustment
4. Refund employees of the excess
of the Withholding Taxes on Compensation
Sec. 80(A); Sec. 79(H); Sec. 24(A)
Sec. 80(A) NIRC, as amended
Employer
Withhold & Remit
Correct amount of tax
BIR

Sec. 79(H)
* On or before year end but prior to payment
of the compensation for the last payroll period,
the employer shall determine the tax due from
each employee on taxable compensation income
for the entire taxable year - Sec. 24(A).
*The difference of the tax due and tax withheld
will either be withheld on Dec. or refunded to the
employee not later Jan. 25, following year.
For Monthly Remittance:
COMPENSATION ==> BIR Form 1601C
For Annual Information Return:
COMPENSATION &
FINAL
===> BIR Form 1604CF
For Certificate of Taxes Withheld:
COMPENSATION ===> BIR Form 2316
Due Dates:
January to November – On or before the 10th
day of the following the month, whether
W/A is LT or
Non-LT
(RR 6-01)
December - On or before Jan. 15 of the
following year, whether W/A is LT or
Non-LT (RR 6-01)
Annually - On or before Jan. 31 of the
following year (RR 3-02)
Attachments Required:
1.
2.
3.
4.
5.
Alphalist of Employees as of Dec. 31 with No Previous
Employer within the Year;
Alphalist of Employees as of Dec. 31 with Previous
Employer(s) within the year;
Alphalist of Employees Terminated before Dec. 31;
Alphalist of Employees Whose Compensation Income
are Exempt from Withholding Tax but Subject to
Withholding Tax
Alphalist of Employees other than Rank & File Who
Were Given Fringe Benefits During the Year
*
Optional for taxable year 2001
*
Mandatory effective taxable year 2002
START
Preparation of BIR
Form No. 1604 CF
Before Jan. 31
Employer files w/
BIR the duly accomplished
BIR FORM 1604CF
Subject to WTC?
On or before Jan 31
n
Employer shall issue
2306to the payee (FWT)
On or before Jan. 31
y
Entitled to substituted filing?
n
Employer shall issue
2316 to employee
y
Employer/employee to execute sworn
joint certification. Employer to furnish
employee copy of 2316/cert. to employee.
Employer to retain copy of joint cert.
On or before Jan. 31
On or before April 15
Employee files ITR
together with 2316 &
other pertinent docs
An illustrative example on the year-end
adjustment is shown under Sec. 2.79(B)(5)(b) of
Revenue Regulations (RR) No. 2-98, as amended.
1. Non-withholding of tax
- Employer fails to withhold the tax
2. Underwithholding
- Employer fails to correctly withhold the tax
3. Non-remittance
-Employer fails to remit total amount withhled
4. Underremittance
-Employer’s remittance is less than total amount
withheld
5. Late remittance
-Employer remits correct amount withheld
beyond the due date
6. Failure to refund excess taxes withheld
◦ -Employer ails to refund excess taxes withheld to
its employees
Penalties for Non-Compliance:
1. Additions to the tax:
a. Sec. 248 – 25% of the amount due (failure)
50% of the amount due (fraud)
b. Sec. 249 – 20% interest per annum
c. Sec. 251 – other penalties + total tax not withheld
d. Sec. 252 - penalties + refundable amount
2. Criminal Liabilities: (upon Conviction)
a. Sec. 255 – other penalties + P10,000 +
imprisonment of 1 yr to 10 yrs
b. Sec. 256 – (Corp.) penalties + fine of P50,000 to
P100,000
c. Sec. 272 – (Public Officers) penalties + fine of P5000
to P50,000 or imprisonment of 6 mos.
to 2 yrs, or both
d. Sec. 275 – (no specific penalty) fine of <P1,000 or
imprisonment of < 6 mos. Or both
In certain instances as provided under
Revenue Memorandum Order No. 19-2007, a
compromise penalty in lieu of criminal liability
may be imposed and collected.
PURPOSE:
◦
TAX DUE = TAX WITHHELD
WHEN:
◦ On or before the end of the calendar year, prior to
the payment of compensation for the last payroll.
◦ If terminated, on the day on which the last
payment of compensation is made.
STEP 1 -
Determine
the taxable regular and
supplementary compensation paid to the
employee for the entire calendar year;
STEP 2 - If the employee has previous employment/s
within the year, add the amount of taxable
compensation paid to the employee by the
previous employer.
STEP 3 -
Deduct from the aggregate amount of
compensation computed in Step 2 the amount
of the total personal and additional exemptions
of the employee;
Personal Exemptions:
Single P50,000
Married
P50,000
Additional Exemption:
P25,000 for each qualified dependent
STEP 4 - Deduct the amount of premium payments on
Health and/or Hospitalization Insurance of
employees who have presented evidence that
they have paid the same during the taxable
year.
Note: The deductible amount shall not exceed
P2,400/annum or P200/month whichever is
lower and total family gross income does not
exceed P250,000 for the calendar year.
STEP 6 - Determine the deficiency or excess, if any, of
the tax computed in Step 5 over the
cumulative
tax
already
deducted
and
withheld since the beginning of the current
calendar year.
Gross Compensation (prev. + present)
Less:Non-Taxable/Exempt Compensation
a)13th month pay & other benefits
b)Other non-taxable benefits
c)SSS, GSIS, PHIC, Pag-ibig and
Union Dues (Employees share only)
Less: a) Personal and additional exemption
b) Health/Hosp. Premium payment
Taxable Compensation Income
Tax due
xxx
xxx
xxx
xxx
xxx
Pxxx
xxx
xxx
xxx
xxx
xxx
OVER BUT NOT OVER AMOUNT RATE OF EXCESS OVER
Not over
10,000
30,000
70,000
140,000
250,000
500,000
10,0000
30,000
70,000
140,000
250,000
500,000
over
5%
10%
15%
20%
25%
30%
34%
500 +
10,000
2,500 +
30,000
8,500 +
70,000
22,500 +
140,000
50,000 +
250,000
125,000 +
500,000
33% in 1999
32% in 2000 and thereafter
Compensation Income-net
Less: Exemption (single)
Taxable Income
Tax Due
Less: Tax Withheld Jan-Nov
EVEN
PAYABLE
REFUNDABLE
Compensation Income-net
A
B
C
230,000
230,000
230,000
50,000
50,000
50,000
180,000
180,000
180,000
32,500
32,500
32,500
32,500
0__
30,000
2,500
34,500
(2,000)
Mr. Dexter, head of the family with a
qualified
dependent
brother
receives
P12,166.67 (net of SSS, Philhealth, HDMF) as
monthly regular compensation starting
January 1, 2002, he filed his resignation
effective June 30, 2002. The tax withheld
from January to May was P2,900.
Total compensation (Jan. - June)
Less: Personal Exemption
Net Taxable Compensation
P73,000.00
50,000.00
P23,000.00
Tax Due
Tax Withheld from Jan. to May
To be refunded on or before 6/30/02
P 1,800.00
2,900.00
(P1,100.00)
Mr. Jacob, married with 2 qualified
dependent children received P18,500
monthly compensation (net of SSS,
Philhealth, HDMF employees contributions).
Taxes withheld from Jan. to Nov. were
P8,158.00.
Total Compensation (Jan - Nov)
Add: Dec. compensation
Gross Compensation
Less: Personal/additional exemption
Total Compensation
Tax due
P
Less: Tax Withheld
Collectible W/tax for Dec. salary
P203,500.00
18,500.00
P222,000.00
150,000.00
P 72,000.00
8,900.00
8,158.00
P
742.00


Manual Submission - 3 copies of
1604CF/1604E Including the alphalist of
employees and income payees.
Diskette/CD & email Submission thru
[email protected]
Where to file?
BIR
Revenue District Office
West- Bonifacio St. Davao City
East – Torres St., Davao City
WAGES
1604CF
+ alphalist
EXPANDED
1604 E
+ alphalist

What to use:

When to submit: On or before
Jan. 31 ff year
on or before
March 1 ff year

Where to submit:
RDO
RDO

Retention
3 yrs
same