BIR Ruling [DA-054-96]

February 2, 1996 BIR RULING [DA-054-96] Manila Gas Corporation Labor Union Manila Attention: Mr . Ramon R . Manalo, Jr . President Gentlemen : This refers to your letter dated March 21, 1995 referring to LOI 97 issued by the then Pres. Ferdinand E. Marcos sometime in 1979 granting various benefits to employees of government-owned and controlled corporations belonging to the infrastructure and public utilities group; that Manila Gas Corporation is one of the government-owned and controlled corporations covered by such decree but the management chose not to grant said benefits and deliberately concealed the existence thereof; that it was only in September 1986 that you accidentally discovered it from an employee of another government-owned corporation; that after an extrajudicial demand failed, you decided to file a complaint at NLRC which promulgated a favorable decision on 21 April 1993, and that the same has, on 6 July 1994 became final and executory and was recorded in the Book of Entries of Judgments; and that pursuant to the Supreme Court decision, covered employees are entitled to the following specific allowances and benefits: cdtech a) Cost of Living Allowance which was already integrated into your basic pay; b) Children's Allowance of P30.00 per child not to exceed four children; c) Amelioration Allowance of 10% of basic pay; d) Uniform Allowance of P500.00 per employee; e) Meal subsidy of P3.00 per day per employee; f) Medical Allowance equivalent to P2,500.00 per annum per employee; and g) Representation and Transportation Allowance for managerial and supervisory position which shall not exceed 40% of Basic Pay; Based on the foregoing, you now requesting for a ruling as to which of the above benefits are subject to tax and that those subject be spread out to different years. In reply, please be informed that pursuant to Section 2(a) of Revenue Regulations No. 6-82, as amended by Revenue Regulations No. 12-86 implementing Section 28 of the Tax Code, as amended by Executive Order No. 37, "facilities or privileges" furnished or offered by an employer to his employees generally, are not considered as compensation subject to withholding if such facilities or privileges are of "relatively small value" and are offered or furnished by the employer merely as a means of promoting the health, goodwill, contentment, or efficiency of his employees. Such being the case, the uniform allowance of P500.00 per employee; meal subsidy of P3.00 per day per employee; and medical allowance equivalent to P2,500.00 per annum per employee need not be included as compensation subject to withholding tax since they are given to promote the health, goodwill, contentment and efficiency of the employees and they are of "relatively small value". However, the cost of living allowance which was already integrated into the basic pay; children's allowance of P30.00 per child not to exceed four children; amelioration allowance of 10% of basic pay; and representation and transportation allowance for managerial and supervisory position which shall not exceed 40% of basic pay are income subject to withholding tax because it does not fall within the meaning of the term "facilities or privileges" as defined under Section 2(a) of Revenue Regulations No. 6-82, as amended by Revenue Regulations No. 12-86. (BIR Rulings No. 101-93 dated March 12, 1993) On the other hand, your request that payment of allowances and benefits which are subject to tax be spread out to different years is hereby denied for Jack of legal basis. cdt Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Revenue Executive Asst. (Legal Service)