NEW TAX EXEMPTIONS FOR EMPLOYEES,

COOPERATIVES, AS EMPLOYERS, MUST TAKE NOTE OF NEW TAX EXEMPTIONS FOR THEIR EMPLOYEES, GRANTED UNDER BIR R.R. NO. 5-2011, DATED MARCH 16, 2011

When the topic of providing additional benefits to their employees is taken up, cooperatives sometimes find it difficult to decide.

Will the benefit be in the form of increased allowances; raise in basic pay; allowances for uniform, medical, hospitalization, for sustenance, like for rice or groceries, etc. Among the concerns is that the benefits are considered part of the employees' total compensations and are thus, taxable.

Sometimes, the money value of the salary increase, for example, only brings the employee to a higher tax bracket and the increase goes only to the payment of the higher tax. It thus, defeats the purpose of the added benefits or salary adjustments.

It is a welcome move that the Bureau of Internal Revenue (BIR) recently expanded the coverage of employee benefits that are not subject to income tax and thus, not subject to withholding tax. These benefits covered shall apply to income earned starting this year 2011.

It issued Revenue Regulations No. 5-2011, dated March 16, 2011.

Under the regulations, the following benefits are not subject to income tax, nor to withholding tax on compensation income of both managerial and rank-and-file employees:

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 government officials and employees;

c) Medical cash allowance to dependents of employees, not exceeding P750 per employee per semester or P125 per month;

d) Rice subsidy of P1,500 or one 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 allowance, e.g. medical allowance to cover medical and health care needs, annual medical/executive check-up, maternity assistance, and routine consultations, not exceeding P10,000.00 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.

We are sure that many employees will be benefited by this. We can only hope that officers of cooperatives will be guided accordingly. Revenue Regulations 5-2011 can be downloaded at www. bir.gov.ph (END)

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