BIR Ruling [DA-102-00]

February 15, 2000 BIR RULING [DA-102-00] DECS Employees Welfare Association Department of Education, Culture and Sports Region III, Maimpis San Fernando, Pampanga Gentlemen : This refers to your letter dated December 14, 1999, in effect, requesting for a ruling on whether or not monetized unused vacation leave credits in excess of ten (10) days is subject to withholding tax. You state that Government officials and employees are allowed to avail of the monetization of fifty percent (50%) of all the accumulated leave credits for valid and justifiable reasons subject to the discretion of the agency and the availability of funds pursuant to Section 23 of the amended Rules I and XVI of the Omnibus Rules Implementing Book V of the Administrative Code of 1987; that this special privilege is not considered regular salary because only those who have accumulated vacation and sick leave credits and are badly in need of certain sum of money are availing; and that this privilege may augment the small salary/income of government employees. In reply, please be informed that although Section 1, Rule IV of the Joint CSC- DBM Circular No. 2-97 allows the monetization of vacation leave credits up to maximum of 30 days, the limit recognized for exemption of said monetization is only 10 days, pursuant to Section 2.78.1(A)(7) of Revenue Regulations No. 2-98. Accordingly, the monetized value of unutilized vacation leave credits in excess of 10 days is subject to income tax and consequently to withholding tax. (BIR Ruling Nos. 031-92; 099-92 and DA-245-99) Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group