BIR Ruling [DA-088-04]

March 1, 2004 BIR RULING [DA-088-04] RR 2-98; 266-93; 139-95 Air Transportation Office Davao International Airport Sasa, Davao City Attention: Mr. Frederick G. San Felix Airport Area Manager Gentlemen : This refers to your letter dated January 28, 2003 requesting clarification on whether the Technical Incentive Allowance (TIA) of One Thousand Pesos (P1,000.00) a month shall be considered as additional compensation of the employees concerned or as a fringe benefit. It is represented that TIA is granted solely to ATO Air Traffic Controllers, Airways Communicators, Air Navigation Specialists and Antenna Rigger, whose functions are highly technical in nature. IAcTaC In reply, please be informed that pursuant to Section 2.78.1 of Revenue Regulations No. 2-98, compensation means all remuneration for services performed by an employee for his employer under an employer-employee relationship, unless specifically excluded by the Code. The name by which the remuneration for services is designated is immaterial. Thus, salaries, wages, emoluments and honoraria, allowances , commissions (e.g. transportation, representation, entertainment and the like); fees including director's fees, if the director is, at the same time, an employee of the employer/corporation; taxable bonuses and fringe benefits except those which are subject to the fringe benefit tax under Section 33 of the Tax Code of 1997; taxable pensions and retirement pay; and other income of a similar nature constitute compensation income. The basis upon which the remuneration is paid is immaterial in determining whether the remuneration constitutes compensation. Thus, it may be paid on the basis of piece-work, or a percentage of profits; and may be paid hourly, daily, weekly, monthly or annually. ( BIR Ruling No. 266-93 dated June 18, 1993 and BIR Ruling No. 139-95 dated September 6, 1995 ) Accordingly, technical incentive allowance of One Thousand Pesos (P1,000.00) a month is embraced within the term compensation and therefore subject to withholding tax. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group