At the beginning of the year, we write down resolutions – promises to change habits that we know are no longer working. Often times, those decisions are reversed, recycled, and quietly carried over from year to year.
Philippine tax policy was not affected by this pattern. Although the need to revisit the roof for de minimis benefits have long been felt due to inflationary pressures and rising costs of living, these restrictions remained unchanged for many years.
With the release of Revenue Regulations (RR) No. 29-2025, the Bureau of Internal Revenue (BIR) finally moved to revise the tax-free ceiling on these benefits.fits starts working on Jan. 6, 2026. The legislation marks a modest but meaningful change — and a timely way to start the year.
De minimis benefitfits are facilities and rights of relatively small value given by employers to employees to promote health, welfare, satisfaction, orficiency. These benefitsfits are exempt from income and withholding taxes; as long as they fall within the prescribed ceiling.
RR 29-2025 raises the ceiling for this tax exemption de minimis advantages, specifically:
Make money from unused vacation (freelancers): from 10 to 12 days
Medical allowance for dependents: from P1,500 per semester (P250 per month) to P2,000
Subsidy for rice: from P2,000 per month to P2,500 per month, or equivalent in kind (one 50 kg bag of rice)
Uniform and clothing allowance: from P7,000 per year to P8,000
Real medical help: from P10,000 per year to P12,000 per year
Washing permission: from P300 per month to P400
Employee achievement awards: from P10,000 per year to P12,000
Gifts during Christmas and major festivals of all ages: from P5,000 per employee per year to P6,000
Overtime food allowance and night/graveyard shift: from 25% to 30% of the applicable minimum basic wage on a regional basis
CBA benefits and productivity incentives: from P10,000 per employee per taxable year to P12,000
Although individual ceiling repairs may not seem very important, when considered cumulatively – in all the many benefitsfit categories and during the year – an increase in the allowable amounts that cannot be taxed can translate into meaningfulness fifinancial impact.
TRUTH OF BENEFITS: OPPORTUNITY TO PLAN
For employers, RR No. 29-2025 presents an important opportunity to reevaluate how compensation is structured. Although it does not increase wages per se, it increases the scope for a more balanced salary and benefitfits structure. This allows employers to better complete tax-ef tax-adjusted salary changesficient, tax-free profitfits that improve the overall well-being of employees.
Salary increases across the board result in permanent costs that include salaries. This affects not only withholding taxes, but also statutory contributions and future compensation bases. On the contrary, it is well organized de minimis benefitfits – within the prescribed ceiling – allow large tenants flbeing able to provide targeted, tax-free support without a proportionate increase in withholding obligations.
Redirecting part of the proposed salary changes to allowable de minimis benefits can bring the same benefitfits for employers and employees alike. For employees, this translates into a higher take-home profitfits and maintains the tax-free status of benefits that directly address their daily needs. For employers, this management approach can help reduce some of the costs of raising wages. In addition, it is well designed de minimis benefitfiA ts program can support employee morale and retention and increase productivity.
For example, benefits such as medical cash grants and rice subsidies can help ease daily expenses. In my opinion, making these benefits easily accessible in a tax-free manner shows the company’s commitment to employee welfare.
ARE THE ADDITIONAL BENEFITS OF DE MINIMIS TO BE SEEN?
RR No. 29-2025 not only revises the existing ceiling, but also raises a broader question: Should de minimis the framework expands to formally recognize other common benefitsfits?
Examples would include transport grants, and technical or communication support which has become an important part of an increasingly digital environment. To recognize such things within the de minimis the framework, subject to appropriate limitations, will not create new forms of compensation, but rather acknowledges the costs that workers already have.
Given the challenges of increasing the minimum wage, the increase de minimis benefitfiDealing with such daily needs can seem like a practical setback. The preparation of de minimis The framework provides a more flexible and easier-to-take alternative to wage legislation. While these measures are not a substitute for comprehensive labor reforms or proper wage adjustments, they provide a practical way to deliver targeted support to workers.
FINAL THOUGHT: IT IS INCREASING BUT IMPORTANT
The amendment under RR 29-2025 is applicable and expressly accepted. However, the fact that these limits remained unchanged for several years, and were later adjusted to a limited extent, suggests that the revised ceiling may still fail to fully reflect current inflation rates.
At the same time, although the regulation may not have the major impact of other recent measures such as the VAT rules on digital services, its sign.ficancer should not be taken lightly. Changes to de minimis The ceiling usually affects all employers and employees, reducing industries and business sizes. Precisely because of this broad reach, even incremental adjustments have significant implications for compensation planning, payroll compliance, and cost management.
Whether it is through periodic adjustments to the existing ceiling or seeing more benefits over time, I hope the BIR will continue to revisit de minimis frame regularly, to avoid lagging behind economic realities. Like a New Year’s resolution, the real value of this change is not only in making one fix, but also in making a commitment to revisit it again.finot over time.
The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for spec.fic advice.
Clarissa Mae Sy is a manager in the Tax Services group of Isla Lipana & Co., the Philippine member firm of PwC’s global network.
+63 (2) 8845-2728
clarissa.mae.sy@pwc.com
