Current Revenue Issuances for Separation Pay & “De Minimis” Benefits

1. Current Revenue Issuances for Separation Pay & “De Minimis” Benefits Presented By: Carlos S. Salazar Revenue District Officer RDO No. 56- Calamba City

2. Revenue Memorandum Order No. 26 – 2011 dated June 13, 2011 Guidelines in the tax treatment of Separation Benefits received by officials and employees on account of their separation from employment due to death, sickness or other physical disability and the issuance of Certificate of Tax Exemption from income tax and from withholding tax.

3. Pursuant to Section 32(B)(6)(b) of the Tax Code, as amended, any amount received by an official or employee or by his heirs from the employer as a consequence of separation of such official or employee from the service of the employer because of death, sickness or other physical disability or for any cause beyond the control of the said official or employee shall be excluded from the gross income and shall be exempt from income tax regardless of age or length of service. However, there is need to secure for a Certificate of Tax Exemption for the separation pay to be exempt.

4. Certificate of Tax Exemption will be issued by: Regional Director if separated from the service of the employer due to death, sickness or other physical disability. Law Division in the National Officeif separated for any other causes beyond the control of the said official or employee

5. The requesting Official/Employee (or by his heirs) who was separated from employment due to death, sickness or other physical disability, regardless of age and length of service, or requesting Employer, shall be required to submit all the documentary requirements for the processing of the Certificate of Exemption with the Revenue District Office where the Employer is originally registered.

6. ANNEX “A”CHECKLIST OF REQUIREMENTS(FOR TAX EXEMPTION APPLICATION OF SEPARATION BENEFITS UNDER SECTION 32 (B)(6)(b) OF THE NIRC, AS AMENDEDDUE TO DEATH, SICKNESS/PHYSICAL DISABILITY) 1. Application letter stating the factual and legal basis for tax exemption 2. Certified true copy of Death Certificate, if separation was due to death of employee. 3. If separation was due to sickness/physical disability: a.). Sworn Affidavits to be executed by the employer’s physician and the Head of Office/Entity, attesting to the fact that the retiring/separated official or employee is suffering from a serious illness or physical disability that affects the performance of his duties and endangers his life, if he continues workingb.) Clinical Record of the official/employee concerned indicating the history of illness/physical disability and initial diagnosisc.) Laboratory examination confirming the illness suffered by such official/employee or medical certificate confirming the physical disability of the official/employee

7. Note: The Bureau shall not be precluded from requiring additional documents to prove entitlement to tax exemption under the prevailing circumstances.

8. Revenue Regulations No. 5-2011 dated March 16, 2011 Further Amendments to Revenue Regulations Nos. 2-98 and 3-98, as Last Amended by Revenue Regulations No. 5-2008, with respect to “ De Minimis Benefits”

9. The term “DE MINIMIS” benefits which are exempt from the fringe benefit tax shall, in general, be limited to facilities or privileges furnished or offered by an employer to his employees that are relatively small value and are offered or furnished by the employer merely as means of promoting health, goodwill, contentment, or efficiency of his employees.

10. The following are considered as “De Minimis” benefits not subject to income tax as well as withholding tax on compensation income of both managerial and rank & file employees: Monetized unused vacation leave credits of private employees not exceeding ten (10) days during the year; Monetized value of vacation and sick leave credits paid to government officials and employees; Medical cash allowance to dependents of employees, not exceeding P750 per employee per semester or P125 per month; Rice subsidy of P1,500.00 or one (1) sack of 50-kg.rice per month amounting to not more than P1,500.00; Uniform and Clothing allowance not exceeding P4,000 per annum;

11. “De Minimis” benefits, (continued): 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; Laundry allowance not exceeding P300 per month; Employee’s 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;

12. Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per employee per annum; 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.

13. End of Presentation Thank You!!!