Revenue Regulation (RR) No. 52011 Amendments to RR
Revenue Regulation (RR) No. 52011 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 govt. 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) Revenue Memorandum Order No. 26-2011
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 employers 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 Revenue Regulations No. 1-68
Private Retirement Benefit Plan Regulations Pursuant to Sec. 79(B) Scope: 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)
Requirements for Exemption: (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 Reasonable Benefit Plan may consist of:
Pension; Gratuity; Stock bonus; Profit-sharing plan (contributory on noncontributory on the part of the employee Requisites of a Reasonable Retirement Benefit Plan: (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 employers 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 Definition of Terms: (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 moneys worth; (e)Sells substantial part of its securities or properties for less than moneys 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) Revenue Memorandum Circular (RMC) No. 27-2011
Revocation of BIR Ruling Nos. 002-99, DA-184-04, 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 PagIbig 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 Employees Contribution: - (RA 8282) (a) beginning as of the last day of the calendar month when an employees compulsory coverage takes effect and every month thereafter during his employment, the employer shall deduct
and withhold from such employees monthly salary, wage, compensation or earnings, the employees 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% -employees income is <= P1,500/mo.
2% -employees income is >P1,500/mo 2% -employers 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
RMC 21-2010 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 Objective: 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.
FORMS TO BE USED 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 NonLT (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 Effectivity of Substituted Filing * 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
Note: 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. Failure to Comply 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 -Employers 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
collected. Year-End Adjustment 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.
YEA-Annualized Method 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.
YEA-Annualized Method 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 YEA-Annualized Method
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. YEA-Annualized Method STEP 6 - Determine the deficiency or excess, if any, of the tax computed in Step 5
over the deducted cumulative and tax withheld beginning of the current
year. already since the calendar Annualized Withholding Tax - Formula Gross Compensation (prev. + present) Pxxx
Less:Non-Taxable/Exempt Compensation xxx a)13th month pay & other benefits xxx b)Other non-taxable benefits xxx c)SSS, GSIS, PHIC, Pag-ibig and Union Dues (Employees share only) xxx xxx Less: a) Personal and additional exemption xxx b) Health/Hosp. Premium payment xxx xxx Taxable Compensation Income
xxx Tax due xxx INCOME TAX TABLE OVER BUT NOT OVER AMOUNT RATE OF EXCESS OVER Not over 10,000 30,000 70,000 140,000 250,000 500,000
33% in 1999 32% in 2000 and thereafter BASIC CONCEPT OF YEAR -END ADJUSTMENT 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 34,500 2,500 (2,000) Sample Problem 1 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. Computation: Total compensation (Jan. - June) P73,000.00 Less: Personal Exemption
50,000.00 Net Taxable Compensation P23,000.00 Tax Due P 1,800.00 Tax Withheld from Jan. to May 2,900.00 To be refunded on or before 6/30/02 (P1,100.00) Sample Problem 2 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. Computation: Total Compensation (Jan - Nov) P203,500.00 Add: Dec. compensation 18,500.00 Gross Compensation P222,000.00 Less: Personal/additional exemption
150,000.00 Total Compensation P 72,000.00 Tax due P 8,900.00 Less: Tax Withheld 8,158.00 Collectible W/tax for Dec. salary P 742.00 Annual Information Return 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 Annual Information Return WAGES EXPANDED What to use: 1604CF + alphalist + alphalist
1604 E When to submit: On or before on or before Jan. 31 ff year March 1 ff year Where to submit: RDO
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