REVENUE MEMORANDUM CIRCULAR NO. 107-2024 issued on September 16, 2024 clarifies the taxability of the medical allowance granted to qualified government civilian personnel under Executive Order (EO) No. 64, series of 2024.

Section 2.78.1 (A)(3) of Revenue Regulations (RR) No. 2-98, as amended, provides that de minimis benefits furnished or offered by an employer to his employees for the promotion of their health, goodwill, contentment, or efficiency are not considered as compensation subject to Income Tax and, consequently, to Withholding Tax.

Among the de minimis benefits under RR No. 2-98, as amended, is the actual medical assistance, e.g. medical allowance to cover medical and healthcare needs, annual medical/executive check-up, maternity assistance, and routine consultations, not exceeding ₱ 10,000.000 per annum.

To prevent any ambiguity, the medical allowance benefit granted under EO No. 64, series of 2024, falls under the de minimis benefit contemplated under Section 2.78.1(A)(3) of RR No. 2-98, as amended.

Such being the case, the actual premium paid to HMO providers in compliance with EO No. 64, series of 2024, is exempt from Income Tax, and, consequently, to Withholding Tax pursuant to Section 2.78.1(A)(3) of RR No. 2-98, as amended. However, medical allowance benefits given in excess of ₱ 10,000.00 (the maximum amount allowed as de minimis benefits for medical assistance) shall be included as part of “other benefits” which is subject to the ₱ 90,000.00 ceiling. Any amount in excess of the ₱ 90,000.00 threshold shall be subject to Income Tax, and, consequently, to the Withholding Tax on compensation.