Under the Internal Income Code, in particular Tax Regulation 1-2015, the IEP is exempt from income tax in connection with benefits collected under a collective agreement (CBA); more than ten thousand pesos (P10,000.00). As a general rule, all compensation paid by a government employee is taxable, unless they are expressly exempt from the law. At the end of the calendar year, employees are increasingly excited about bonuses and incentives such as the collective agreement (CBA) and productivity incentives. But for most companies that offer these bonuses and incentives, do tax issues arise, such as current tax rules, when CBA and productivity stimulus systems exceed the de minimis limit? Benefits paid by a worker under a collective agreement (CBA) and productivity incentive schemes [are exempt from income tax], provided that the total annual monetary value, accumulated by CBA and productivity incentive systems, does not exceed ten thousand pesos (P10,000.00) per employee per taxable year. The Bureau of Internal Revenue (BIR) has adopted Tax Regulation (RR) 5-2011, as amended, which contains a specific list of de minimis benefits. B such as rice subsidies, uniform and clothing allowance, laundry allowance, cash medical allowance for dependents, effective medical assistance, etc., with specific tax-exempt limits. De minimis benefits are institutions and privileges of relatively low value and are simply offered or implemented by the employer to promote the health, goodwill, satisfaction or effectiveness of its staff. It also points out that if the employer pays more than the maximum amount of de minimis benefits, the surplus must be considered taxable income. However, this surplus remains reflected in an individual`s personal tax exclusion threshold, as outlined below. Therefore, the IEP up to P10,000.00 is not taxable. However, since public servants are only entitled to a maximum of P5,000.00 IEPs, the remaining P5,000.00 can be allocated to benefits that are called state agents under collective agreements or generally called collective agreements (NAC).
In bir Ruling No. 293-2015 (August 2015), the BIR was asked to clarify the treatment of amounts in relation to public sector workers` benefits (NAC) for income tax-exempt collective de minimis negotiations (NAC) as part of the increase in the 13th month of exempt wages and other benefits collected by RA 10653. The BIR has decided that CBA or productivity incentive benefits will only be exempt from tax as de minimis benefits if the total amount of these benefits does not exceed P10,000 per taxable year.