BIR Ruling

December 4, 1975 Joaquin Cunanan & Co. Certified Public Accountants P. O. Box 2288 Gentlemen : This refers to your letter dated December 3, 1975 requesting a ruling based on the following facts: "Mr. Keith R. Bloodworth is an Australian citizen, married with two children. He is employed by the Richardson-Merrell Group of Companies. As member of the Richardson-Merrell's "International Group", Mr. Bloodworth must be prepared to accept transfers from country to another to meet the need of his employer. Recently, he was appointed President and Managing Director of Richardson-Merrell (Philippines), Inc. cdt "In view of this appointment, Mr. Bloodworth and his family had to reside in the Philippines. Being President and Managing Director, he will have to entertain, from time to time, in behalf of the company, executives of customer companies and other business associates. Because of this, his employer required him to rent a more luxurious house and spent for utilities, which considering the size of his family (a wife and two children) and aggravated by high cost of rent and utilities in the Philippines, is way beyond his personal needs. Given a free choice, Mr. Bloodworth would spend for his rent and utilities that much he would spend had he remained in Sydney, Australia. "To compensate Mr. Bloodworth, Richardson-Merrell will reimburse the excess of the actual cost of rent and utilities over his personal needs. The Excess as established by an independent consultant would amount to P96,304.00 annually." In reply, I have the honor to inform you that this Office believes, and so holds, that, under the foregoing facts, the amount to be reimbursed to your client, which is equivalent to the excess of the actual cost of rent and utilities over his personal needs is not subject to income tax. (Collector of Internal Revenue vs. Arthur Henderson, G.R. Nos. L-12954 and L-13049, February 28, 1961). casia Very truly yours, (SGD.) EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."