BIR Ruling [DA-005-04]

January 6, 2004 BIR RULING [DA-005-04] Section 33; RR 3-93; 009-2000 Cargill Philippines, Inc. Bo. Dampol 1st Pulilan Bulacan Attention: Ms. Maria Fe Mendoza Director for Administration Gentlemen : This refers to your letter dated August 27, 2003 requesting for a clarification for the taxability of the employer's 50% share in a car program for your sales personnel. It is represented that you are a company engaged in the manufacture and distribution of animal feeds; that the company either leases or makes outright purchases of vehicles for its salesmen's use; that you have a car program for your sales people: that the company shares 70% of the lease cost and the employee, 30%; that official use shall take precedence over personal use; and that the vehicle is in the name of the company but at the end of the lease term, ownership is transferred to the employee. In reply, please be informed that Section 2.33(B)(3)(f) of Revenue Regulations No. 3-98 implementing Section 33 of the Tax Code of 1997, reads: "f) If the employer leases and maintains a fleet of motor vehicles for the use of the business of the employer, the value of the benefit shall be the amount of rental payments for motor vehicles not normally used for sales, freight, delivery services and other non-personal use. The monetary value of the fringe benefit shall be fifty percent (50%) of the value of the benefit." Such being the case, and since you require your sales personnel to share at least 30% of the monthly rental and deducted from their payroll subject to the withholding tax on compensation, this Office is of the opinion as it hereby holds that only 20% of the monthly car rental is taxable as fringe benefit tax inasmuch as the 30% share of the employee has already been taxed as compensation. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group