On December 22, 2025, the Philippine Bureau of Internal Revenue (“BIR”) issued Revenue Regulations (“RR”) No. 29-2025, amending RR No. 2-98 to increase the non-taxable thresholds for several employee de minimis benefits. The amended regulations took effect on January 6, 2026.
WHY THIS MATTERS
De minimis benefits are small-value employer-provided rewards designed to promote employee well-being, goodwill, and efficiency. Under the Philippine Tax Code and related regulations, these benefits are exempt from income tax, withholding tax on compensation, and fringe benefit tax.
The revised ceilings under RR No. 29-2025 enable employers to offer greater financial support to employees without incurring additional tax liabilities, resulting in increased take-home pay for recipients. For HR and payroll managers, the amendments may require updates to payroll processing, benefit documentation, and compliance procedures.
Key Highlights
RR No. 29-2025 increases the maximum non-taxable amounts across several categories of employee de minimis benefits, effective January 6, 2026. The key changes are as follows:
De Minimis Benefit | Previous Regulations | RR No. 29-2025 | Change |
Uniform and clothing allowance | PHP 7,000 per year | PHP 8,000 per year | +1,000 per year |
Rice subsidy | PHP 2,000 per month | PHP 2,500 per month | +500 per month |
Medical cash allowance for dependents | PHP 1,500 per semester (250 per month) | PHP 2,000 per semester (333 per month) | +500 per semester |
Actual medical assistance (e.g., routine consultations, maternity support, executive check-ups) | PHP 10,000 per year | PHP 12,000 per year | +2,000 per year |
Laundry allowance | PHP 300 per month | PHP 400 per month | +100 per month |
Employee achievement awards —including cash, gift certificates, or tangible property | PHP 10,000 per year | PHP 12,000 per year | +2,000 per year |
Christmas and major anniversary gifts | PHP 5,000 per year | PHP 6,000 per year | +1,000 per year |
Daily meal allowances for overtime or night shifts for minimum wage earners | Up to 25 percent of basic minimum wage | Up to 30 percent of basic minimum wage | +5 percent of basic minimum wage |
Benefits under collective bargaining agreements (CBAs) and productivity incentives | PHP 10,000 per year | PHP 12,000 per year | +2,000 per year |
Monetized vacation and sick leave (government employees) | Fully exempt | Fully exempt | No change |
Monetized unused vacation leave credits for private employees | 10 days per year | 12 days per year | +2 days |
Under the Philippine Tax Code and prevailing regulations, benefits granted by employers to employees that do not qualify as de minimis are generally subject to tax, unless they fall under “other benefits” that are taxable only on the portion exceeding the PHP 90,000 non-taxable threshold for 13th month pay and other benefits.
KPMG INSIGHTS
RR No. 29-2025 allows employers to provide additional financial support to employees without incurring additional income or fringe benefit tax, resulting in employees receiving higher take-home pay. As this regulation affects payroll processing, documentation, and tax compliance, employers are advised to consider reviewing their existing benefit policies to confirm that the benefits they provide are aligned with the updated ceilings.
From a compensation planning and structuring perspective, the expanded de minimis benefits could present an opportunity for cost-efficient compensation strategies.
If assignees and/or their programme managers have any questions or concerns about the scope of the new requirements, its application and potential impacts, and appropriate next steps, they should consult with their qualified GMS professional or a member of the GMS compliance team with KPMG in the Philippines (see the Contacts section).
FOOTNOTE:
1 Republic of the Philippines, Department of Finance, Bureau of Internal Revenue, “RR No. 29-2025,” published on December 22, 2025.
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Disclaimer
The information contained in this newsletter was submitted by the KPMG International member firm in the Philippines.
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