BIR Ruling [DA-134-03]

April 29, 2003 BIR RULING [DA-134-03] Mantrade Development Corporation 2278 Pasong Tamo Extension Makati City Attention: Ms Adelaida Patio Assistant Finance Manager Gentlemen : This refers to your letter requesting this Office to furnish you a copy of BIR rulings on the taxability or non-taxability of the cost of living allowance (COLA) and company's economic assistance for rice (CEAR). In reply, please informed as follows: 1) This Office has consistently ruled that cost of living allowance forms part of the employees' compensation income subject to withholding tax. Only COLA received by the Philippine National Police (PNP) personnel is exempt from income tax and consequently, to the withholding tax pursuant to Section 71 in relation to Section 77 of Republic Act No. 6975, otherwise known as "An Act Establishing the Philippine National Police under a Reorganized Department of the Interior and Local Government, and for other Purposes." SETAcC 2) The amount of rice subsidy benefit must be subject to the basic limitation of only P1,000 each month. There cannot be an aggregation of values on an annual basis to justify any excess over the P1,000 maximum limit at any given month (Revenue Regulations No. 8-2000, as amended by Revenue Regulations No. 10-2000) . We are attaching copies of the latest BIR rulings on the above subject matters for your guidance. Very truly yours, (SGD.) HERMENO A. PALAMINE OIC, Chief, Law Division