BIR Ruling [DA-038-97]

January 23, 1997 BIR RULING [DA-038-97] Delta Weaving Mills, Inc. United Paraaque Subdivision IV No. 2 Dama de Noche Street Km. 19.5 South Superhighway 1700 Paraaque, Metro Manila Attention: Mr . Benito O . Nolasco, Jr . General Manager Gentlemen : This refers to your letter dated January 13, 1997 requesting in effect for a ruling as to whether or not the payments to your employees of accumulated vacation leave and unused sick leave benefits which are converted into cash yearly are taxable. cd It is represented that yearly, you are converting into cash the accumulated vacation leave and unused sick leave benefits of your employees; and that your payment of the said benefits are being claimed by your employees to be non-taxable and should not be taxed. In reply, please be informed that the monetized unused vacation leave credits not exceeding ten (10) days during the year are not subject to income tax and consequently to the withholding tax (BIR Ruling No. 099-92 dated March 20, 1992). However, considering that monetization of leave credits is the payment of the money value of the accumulated vacation leave credits without actually going on leave of absence, the monetization of leave credits therefore shall not apply to sick leave credits because the employees who avails of the sick leave credits has to go on sick leave. (See Joint Civil Service Commission and Department of Budget and Management Circular No. 1, Series of 1991 and BIR Ruling No. 099-92 dated March 20, 1992) cdt Very truly yours, ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)