BIR Documentation Requirements for De Minimis Benefits in Small Corporations

I. Introduction and Legal Framework

De minimis benefits are fringe benefits of relatively small value provided by employers to their employees that are exempt from fringe benefits tax (FBT) and from income tax/withholding tax on compensation. They are governed primarily by Revenue Regulations (RR) No. 2-98, as amended by RR No. 10-2000, RR No. 5-2008, RR No. 5-2011, RR No. 8-2012, RR No. 1-2015, and most importantly RR No. 11-2018 (which incorporated the effects of the TRAIN Law).

These benefits are fully deductible as ordinary and necessary business expenses by the employer under Section 34(A) of the Tax Code and are not considered part of the P90,000 non-taxable 13th-month pay and other benefits ceiling under Section 32(B)(7)(e). Any amount in excess of the prescribed de minimis ceilings, or benefits not falling under the enumerated list, shall be treated as taxable “other benefits” (if below the P90,000 ceiling) or taxable fringe benefits subject to FBT.

The rules apply uniformly to all employers, whether large conglomerates or small corporations. However, small corporations (typically those with gross sales/receipts of P100 million and below, or even micro/small under the MSME definition) are more vulnerable during BIR audits because they usually have informal documentation practices.

II. Current Enumerated De Minimis Benefits and Ceilings (as of December 2025 – RR No. 11-2018 remains the latest amendment)

1. Monetized unused vacation leave credits of private sector employees – not exceeding 10 days per year.
2. Monetized value of vacation and sick leave credits paid to government officials and employees (no 10-day limit).
3. Medical cash allowance to dependents of employees – not exceeding P1,500 per semester or P250 per month.
4. Rice subsidy – P2,000 or one (1) sack of 50-kg rice per month (whichever is higher in value is allowed as long as it does not exceed the equivalent of one sack).
5. Uniform and clothing allowance – not exceeding P6,000 per annum.
6. Actual medical assistance (e.g., medical allowance, annual medical/executive check-up, maternity assistance, routine consultations) – not exceeding P10,000 per annum.
7. Laundry allowance – not exceeding P300 per month.
8. Employee achievement awards (in tangible personal property other than cash or gift certificate, for length of service or safety achievement) – not exceeding P10,000 per annum, given under an established written plan that does not discriminate in favor of highly paid employees.
9. Christmas and major anniversary celebration gifts – not exceeding P5,000 per employee per annum.
10. Daily meal allowance for overtime work or night/graveyard shift – not exceeding 25% of the basic minimum wage on a per region basis.
11. Benefits received under CBA and productivity incentive schemes – combined total monetary value not exceeding P10,000 per employee per taxable year.

All other benefits not included in the above list are automatically considered taxable fringe benefits or “other benefits.”

III. Why Rigorous Documentation Is Critical for Small Corporations

Small corporations are frequently audited under the BIR’s Oplan Kandado program or RELIEF system because their tax payments are easier to verify. Common audit findings that trigger deficiency FBT, withholding tax on compensation, and penalties include:

• Reclassification of allowances as taxable compensation or fringe benefits due to lack of proof that they qualify as de minimis.
• Disallowance of expense deduction for failure to substantiate under Section 34(A) in relation to Section 232 (preservation of books and records).
• Imposition of 12% VAT if the benefit is deemed provided for a consideration.

The BIR examiner will almost always issue a Preliminary Assessment Notice (PAN) or Formal Assessment Notice reclassifying undocumented or insufficiently documented benefits.

IV. Minimum Required Documentation (Accepted BIR Practice)

The BIR has no single Revenue Memorandum Circular that lists exact documents for every de minimis item, but the following are the documents consistently accepted and required during audits:

A. General / Overarching Documents (Required for ALL de minimis benefits)

1. Board resolution or company policy/memorandum signed by the president or authorized officer explicitly stating:
   • The list of de minimis benefits being granted.
   • The amount or nature of each benefit.
   • That the benefits are granted to all employees uniformly or under reasonable classification (to avoid discrimination issue).
2. Alphabetical list of employees (Alphalist) with the following columns:
   • Employee name, TIN, position (rank-and-file or managerial/supervisory).
   • Specific de minimis benefit received.
   • Date received and amount/value.
   • Running total per employee to prove non-excess of ceilings.
3. Separate payroll journal or subsidiary ledger for non-taxable de minimis benefits (must be segregated from taxable compensation).

B. Specific Documentation per Type of Benefit

1. Rice Subsidy

   • If in kind: Delivery receipts/invoices from supplier + distribution list with employee acknowledgment receipts (AR) containing the statement “Received ___ sack(s) of rice as de minimis benefit.”
   • If in cash: Payroll or separate voucher with notation “Rice subsidy – de minimis” + signed AR by employee.

2. Uniform/Clothing Allowance

   • Official receipts/invoices from supplier in the name of the company.
   • Distribution list with employee signatures and statement “Received uniform/clothing as de minimis benefit.”

3. Medical Cash Allowance to Dependents (P250/month)

   • Usually included in payroll with notation “Medical allowance for dependents – de minimis.”
   • No need for medical receipts because it is an allowance, not reimbursement.

4. Actual Medical Assistance (up to P10,000/year)

   • Hospital/doctor’s receipts or statement of account (may be in the name of employee or dependent).
   • Reimbursement voucher signed by employee with certification that it is for medical/healthcare needs.

5. Laundry Allowance

   • Usually paid monthly through payroll with notation “Laundry allowance – de minimis.”

6. Monetized Vacation/Sick Leave Credits

   • Leave ledger/card per employee showing accumulated and unused leaves.
   • Computation sheet showing number of days monetized × daily rate.
   • Payroll or voucher with notation “Monetization of leave credits – de minimis.”

7. Employee Achievement Awards

   • Written plan/program (e.g., “10 years = plaque + P8,000 watch”).
   • Minutes of awarding ceremony or memorandum announcing the award.
   • Acknowledgment receipt describing the tangible property received.

8. Christmas Gifts / Anniversary Gifts

   • Invoice/receipt from supplier.
   • Distribution list with employee signatures.

9. Overtime Meal Allowance

   • Approved overtime request form or daily time record showing overtime/night shift.
   • Voucher or payroll notation “Overtime meal allowance – de minimis” not exceeding 25% of regional minimum wage.

10. CBA/Productivity Incentive Benefits (combined ≤ P10,000)

    • Copy of registered CBA or productivity incentive scheme.
    • Computation and distribution list.

V. Best Practices for Small Corporations

1. Issue one comprehensive “De Minimis Benefits Policy” memorandum at the beginning of each year (or upon adoption) and attach it to the BIR audit files.
2. Use a simple Excel alphalist that automatically computes running totals per employee – this single file has saved countless small corporations during audits.
3. Scan and keep digital copies of all acknowledgment receipts and invoices for at least 10 years (pursuant to RR No. 17-2013, records must be preserved for 10 years from the date of the last entry).
4. Reflect de minimis benefits separately in the annual information return (BIR Form 1604-CF) and in the certificates of compensation (BIR Form 2316).
5. For corporations with 10 or fewer employees, a single bound “De Minimis Benefits Register” (with columns for date, employee name, type of benefit, amount, OR/AR number, remarks) is usually sufficient and impressive to examiners.

VI. Consequences of Inadequate Documentation

• Reclassification of the entire benefit as taxable fringe benefit (32% FBT for managerial or withholding tax on compensation for rank-and-file).
• Disallowance of expense → additional income tax + 20% interest + 25%/50% surcharge.
• Possible compromise penalty under Oplan Kandado for continued failure.

VII. Conclusion

Even small corporations cannot afford to treat de minimis benefits casually. A modest investment in proper policy issuance, acknowledgment receipts, and a well-maintained alphalist/register will almost always result in zero deficiency assessments on this item during a BIR audit. The rules have remained stable since RR No. 11-2018, giving employers ample time to institutionalize compliant documentation practices.