BIR Ruling [DA-027-98]

January 29, 1998 BIR RULING [DA-027-98] Ms. Ma. Elena L. Roslyn Blk. 4, Rose Street PBN, Buraguis Legazpi City M a d a m : This refers to your letter dated June 19, 1997 requesting for ruling as to whether or not the granting of additional compensation allowance in the amount of P500.00 per month to government employees is subject to income tax. In reply, please be informed that the Five Hundred Pesos (P500.00) additional compensation per month granted to government officials and employees beginning May 1, 1993 with salary grade up to Grade 25 under Administrative Order No. 53 is in the nature of compensation as explicitly provided in the first "WHEREAS clause" of the said Administrative Order. However, Item No. 1 (1.2) of the said Order provides, viz: "This Administrative Order is issued to extend the same privilege to the rest of the personnel of the government, which shall partake of an allowance and not subject to GSIS, HDMF premiums and income tax deductions pending its formal integration into the basic pay of the subject government personnel. " (Emphasis supplied) Such being the case, the said P500.00 additional compensation shall be subject to income tax and consequently to the withholding tax prescribed under Section 72 of the Tax Code, as implemented by Revenue Regulations No. 6-82, as amended. However, the withholding tax thereon shall be made only as of the time of its integration into the basic pay of the subject government personnel with salary up to Grade 25. (BIR Ruling No. 59-95 dated March 16, 1995) Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal & Enforcement Group