The Bureau of Internal Revenue (BIR) has officially increased the tax-free ceiling for various employee allowances and benefits, providing welcome financial relief for Filipino workers. The new rules, detailed in Revenue Regulation (RR) No. 29-2025, were released on December 22, 2025, and took full effect on January 6, 2026.
Updated Tax-Exempt Thresholds for Key Benefits
This regulatory update revises the maximum amounts for de minimis benefits, which are exempt from both income tax on compensation and fringe benefit tax. The adjustments cover a wide range of common workplace perks, directly impacting the net take-home pay of employees across the public and private sectors.
The revised thresholds are now as follows:
- Monetized unused vacation leave for private sector employees, now covering credits not exceeding 12 days per year.
- Rice subsidy increased to P2,500 per month or one 50kg sack of rice of equivalent value.
- Uniform and clothing allowance raised to a maximum of P8,000 annually.
- Medical assistance (including check-ups, maternity aid, consultations) now has a higher cap of P12,000 per year.
- Laundry allowance set at not more than P400 monthly.
- Christmas and anniversary gifts can now be up to P6,000 per employee annually and remain tax-free.
Other Notable Adjustments and Effective Date
The regulation also specifies updated limits for several other benefits. The medical cash allowance for dependents is now P2,000 per employee per semester, or roughly P333 per month. For employee achievement awards—whether for safety or length of service—the annual tax-exempt value is P12,000, provided they are given under a non-discriminatory plan.
Furthermore, the daily meal allowance for overtime and night shift work is now pegged at 30% of the basic minimum wage on a per-region basis. Benefits received from Collective Bargaining Agreements (CBA) and productivity incentives are also tax-exempt, provided the combined annual value does not exceed P12,000 per employee.
With the effective date of January 6, 2026, all these increases are now in force. Employers and payroll departments are expected to adjust their computations immediately to comply with the new BIR guidelines.
Implications for Filipino Employees and Employers
This update from the BIR is a significant move that increases the real, take-home value of compensation packages. For employees, it means a slightly higher net income as more of their benefits are shielded from taxation. For employers, it provides updated and clear guidelines for structuring compliant and competitive benefits packages.
It is crucial for both human resources departments and individual taxpayers to review their current benefits against these new thresholds. Ensuring proper implementation will prevent future tax issues and help maximize the financial well-being of the workforce. The BIR advises the public to "be guided accordingly" by this latest issuance.
