BIR Ruling

April 21, 1966 Mr. Lyle K. Little J. Water Thompson Co. Mary Bachrach Building Port Area, Manila S i r : This refers to your request for a ruling on a query stated as follows: cdll "My company is presently paying a monthly rental of P850.00 for the house I am occupying. The house, consisting of a sala, three bedrooms, dining room, kitchen, 2 toilets and bathrooms, servants' quarters, terrace, garage and spacious lawn, exceeds the personal needs of myself, my wife and three small children. This house, and more particularly its location, was purposely selected by my company so I can represent it fittingly as its Vice President & General Manager, and entertain its clients and prospective clients as well as important guests of the company coming from the United States and other foreign countries. If not for this duty to entertain and represent the company, and if I were free to choose my own living quarters, I would have rented another house in another location sufficient for the personal needs of myself and my family with a monthly rental of not exceeding P500.00". In reply, I have the honor to inform you that when a living quarter is furnished in addition to cash salary, the rental value of such quarter should be reported as income (Sec. 41, Rev. Reg. 2) taxable to the recipient. The "convenience of the employer" rule is applicable only to the employee and does not apply to the family of the employee. Moreover, said rule is subject to the following conditions: That the housing must be on the business premises of the employer and that the employee must be required to accept such housing as a condition of his employment (Mertens, Vol. 2, Chp. 11, p. 58), These conditions are not present in your case. The duty to entertain guests and represent your company is incidental to your position as vice-president and General Manager of your company. Besides, by your social standing and considering that there are five members of your family, the rented house in question is still not beyond or in excess of your personal needs and that of your family. The facts as represented by you leads to no other conclusion than that the house furnished to you by your employer corporation is for your convenience. In view thereof, this Office is of the opinion and so holds that you are subject to the Philippines income tax on the monthly rental of P850.00 paid in addition to cash salary by your employer-corporation for the house you and your family are presently occupying. aisadc Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue