The Bureau of Internal Revenue (BIR) moved to further amend the “De Minimis” benefits provisions of RR No. 2‑98 through recent issuances that update ceilings and clarify eligible items for tax exemption. The changes are intended to align statutory benefit limits with current economic conditions and to implement provisions reflected in recent fiscal legislation. The updated limits are effective as of January 6, 2026.
Key Regulatory Updates
- Revenue Regulations No. 4‑2025 formally amends the De Minimis provisions and specifically increases the Clothing/Uniform Allowance ceiling and clarifies withholding rules on compensation income.
- Revenue Regulations No. 29‑2025 further updates the list and ceilings of non‑taxable de minimis benefits, expanding the scope of exempt items and raising thresholds employers may grant without tax consequences.
- Legal and tax advisories note that the amendments were issued pursuant to the National Internal Revenue Code authorities and aim to modernize the list of exempt benefits.
Key Amendments Under RR No. 4-2025 and RR No. 29-2025
| Benefit Type | Previous Ceiling | New Ceiling (2025 Amendments) | Tax Treatment |
| Uniform & Clothing Allowance | ₱6,000 per annum | ₱7,000 per annum | Exempt from income tax and fringe benefit tax |
| Employee Achievement Awards | Limited to tangible property | Expanded to include cash, gift certificates, or tangible property | Exempt if reasonable and in recognition of service |
| Other De Minimis Benefits | As listed in RR No. 2-98 | Expanded coverage under RR No. 29-2025 | Exempt from income tax and fringe benefit tax |
Implications for Employers
- Payroll Planning: Employers can now provide higher clothing allowances without triggering tax liabilities.
- Employee Engagement: Achievement awards can be more flexible, allowing recognition in cash or vouchers.
- Compliance: HR and accounting teams must update compensation policies to reflect the new ceilings and ensure proper documentation.
Implications for Employees
- Increased Take-Home Value: Employees benefit from higher non-taxable allowances.
- Recognition Flexibility: Awards can now be more meaningful and personalized.
- Tax-Free Advantage: These perks remain exempt, ensuring no reduction in net pay.
Account It Right Perspective and Recommendations
We recommend that businesses:
- Review current benefit policies immediately and map existing allowances against the new ceilings.
- Update payroll systems to prevent inadvertent taxability when amounts exceed the new thresholds.
- Document rationale and distribution rules for achievement awards and allowances to withstand BIR scrutiny.
The amendments to RR No. 2-98 through RR No. 4-2025 and RR No. 29-2025 represent a progressive shift in Philippine tax policy, enhancing employee welfare while supporting employer flexibility.
Account It Right recommends that businesses review compensation structures immediately to integrate these changes and ensure compliance.
Sources: BusinessMirror | Bureau of Internal Revenue