BIR Ruling [DA-035-98]

February 2, 1998 BIR RULING [DA-035-98] Ms. Myrna E. Sobremonte Chief, Accounting Division BIR, Quezon City M a d a m : This refers to your letter dated July 7, 1997 requesting for a clarification on whether the additional compensation of P500.00 per month given to government personnel per Administrative Order (AO) No. 53 dated May 17, 1993 is taxable. 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 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 Fund premiums and income tax deductions pending its formal integration into the basic pay of the subject government personnel." Such being the case, the said P500.00 additional compensation shall be subject to income tax and consequently to the withholding tax prescribed under the then Section 72 of the Tax Code, as amended. However, the withholding of the tax thereon shall be made only as of the time of its formal integration into the basic pay of the government personnel with salary grade up to grade 25. (BIR Ruling No. 06-95 dated January 16, 1995) casia Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)