Gov’t workers’ clothing allowance remains exempted from tax–BIR

BIR Commissioner Kim S. Henares and Finance Secretary Cesar V. Purisima. INQUIRER FILE PHOTOS

MANILA, Philippines – The clothing allowance for civilians working for the national government remains exempted from tax despite its increase, according to the Bureau of Internal Revenue.

The BIR issued Revenue Regulation No. 8-2012, which reaffirms that such allowance – at least for state workers – is not covered by the withholding tax on compensation and the tax on fringe benefits.

Signed by Finance Secretary Cesar V. Purisima and BIR Commissioner Kim S. Henares, RR 8-2012 sets the exemption provided that the clothing allowance does not exceed P5,000 a year.

Previous rules exempt the clothing allowance of these employees up to P4,000, but Malacañang has raised such an allowance by 25 percent to P5,000 this year.

The new ruling is apparently meant to adjust the tax exemption to the increased amount of clothing allowance.

Clothing allowance is among a list of incomes that the BIR considers “de minimis” benefits, which pertain to employee benefits, which are so small in value that accounting for them is deemed impractical.

Other “de minimis” benefits in the list include monetized unused vacation leave credits of private employees up to 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 up to P750 per employee per semester or P125 per month;

Rice subsidy of P1,500 or a 50-kilogram of sack rice per month amounting to not more than P1,500; actual medical assistance such as medical allowance to cover medical and healthcare needs, annual medical/executive check-up, maternity assistance, and routine consultations, up to P10,000 per year; laundry allowance of up to P300 per month;

Employees achievement awards such as 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 value not exceeding P10,000 per year; gifts given during Christmas and major anniversary celebrations of up to P5,000 per employee per year; and daily meal allowance for overtime work and night shift not exceeding 25 percent of the basic minimum wage.

In March, Budget Secretary Florencio B. Abad said a total of P1.28 billion was earmarked for government workers’ “clothing and uniform grant” this year, covering the increased amount.

Abad said P4,000 of this year’s allowance would be charged against the comprehensive allotment under “personal services” while the additional P1,000 would come from the miscellaneous personnel benefits funds.

He added that based on a budget circular issued last February 20, the additional allowance did not cover the clothing and uniform expenses of military and other uniformed personnel, who were supported by a separate fund.