BIR Ruling [DA-058-96]

February 2, 1996 BIR RULING [DA-058-96] Columbia Carbon Philippines, Inc. 7/F Royal Match Building 6780 Ayala Avenue MAKATI Attention: Mr . Napoleon T . Cabello Treasurer-Controller Gentlemen : This refers to your letter dated October 2, 1995 stating that under the Collective Bargaining Agreement between you and your employees' union, Columbia Carbon Phil., Inc. grants a monthly cash allowance of P1,000.00 equivalent to the cost of one sack of rice to its employees; and that this allowance is subject to periodic review and adjustment based on the prevailing market price. cdtech It is contended that in BIR Ruling Nos. UN-139-94 dated April 12, 1994 and UN-171-94 dated June 2, 1994, this Office ruled that . . . , the rice allowance of P700.00 a month need not be included as part of compensation subject to withholding tax, considering that the value of a good quality/class of one sack of rice prevalent these days would not be less than the stated amount and since the same is of relatively small value offered by a company to promote the goodwill, contentment and efficiency of the employees . . . consequently, the amount of P1,000.00 rice allowance you give to your employees every month is subject to income tax since this is more than the value of one sack of rice in the market today. Based on the foregoing representations, you are now requesting for a ruling on whether the P1,000.00 rice allowance per month of your employees are subject to income tax and consequently to the withholding tax. 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 tax if such facilities or privileges are of relatively small value and are offered or furnished by the employer as a means of promoting the health, goodwill, contentment or efficiency of his employees. Such being the case, the rice allowance of P1,000.00 per month to be given to your employees need not be included as part of compensation subject to withholding tax, since the amount of P1,000.00 is less than the price of one sack of rice prevailing in the market and it is of relatively small value and offered by your company to promote goodwill, contentment, and efficiency of your employees. cd Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)