Tax Notes: BIR clarifies taxability of the medical allowance granted to qualified government civilian personnel

To clarify the taxability of the medical allowance granted to qualified government civilian personnel, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) 107-2024. Background Executive Order (EO) 64, series of 2024, mandates that starting in 2025, a medical allowance not exceeding P7,000 per annum shall be granted to qualified government civilian personnel as a subsidy for the availment of health maintenance organization (HMO)-type benefits. The benefit applies to all civilian government personnel across the executive, legislative and judicial branches, as well as constitutional commissions, other constitutional offices, government-owned or -controlled corporations (GOCCs) not covered by Republic Act 10149 (GOCC Governance Act of 2011) and local government units.

This is applicable regardless of appointment status, whether regular, contractual, casual, appointive, elective, full-time, or part-time. However, the allowance does not extend to government officials and employees who already receive HMO-based health care services through special laws, nor to officials and employees of the legislative and judicial branches and other offices vested with fiscal autonomy. Taxability of the medical allowance The BIR clarified that the medical allowance granted under EO 64 qualifies as a de minimis benefit under Section 2.



78.1(A)(3) of Revenue Regulations (RR) 2-98, as amended. De minimis benefits are minor benefits provided by employers to promote health, goodwill, contentment and efficiency, and are not considered taxable compensation.

Among the de minimis benefits listed in RR 2-98, as amended, is medical assistance — such as a medical allowance to cover healthcare needs, annual medical or executive check-ups, maternity assistance and routine consultations — provided it does not exceed P10,000 per annum. As such, the actual premiums paid to HMO providers, in compliance with EO 64, are exempt from income tax and withholding tax. However, any medical allowance above P10,000 (the maximum allowed for de minimis benefits for medical assistance) will be classified as part of “other benefits” subject to the P90,000 annual tax exemption threshold.

Any amount beyond this threshold will be taxable. Please be guided accordingly. Source: P&A Grant Thornton Certified Public Accountants.