BIR Ruling [DA-164-00]

March 21, 2000 BIR RULING [DA-164-00] DA-245-99 Sangguniang Panlungsod Lungsod ng Ormoc Attention: Mr . Oscar I . Lasam Secretary, Sangguniang Panlungsod Gentlemen : This refers to your letter dated March 29, 1999 addressed to the Secretary of Finance, Hon. Edgardo V. Espiritu, which was indorsed to this Office on May 18, 1999 requesting for a ruling on whether or not the monetization of leave credits not exceeding thirty (30) days is subject to withholding tax. prcd It is represented that the Sangguniang Panlungsod of Ormoc City passed Resolution No. 98-132 dated December 23, 1999 seeking exemption from withholding tax on the monetization of leave credits not exceeding thirty (30) days; and that said Resolution cited the Joint CSC-DBM Circular No. 2-97 providing for the monetization of vacation leave credits up to a maximum of thirty (30) days. In reply, please be informed that pursuant to Section 2.78.1(A)(7) of Revenue Regulations No. 2-98, the monetized value of unutilized vacation leave credits of ten (10) days or less which were paid to the employee during the year are not subject to income tax and to the withholding tax. Notwithstanding the fact that Section 1, Rule IV of the Joint CSC-DBM Circular No. 2-97 allowed the monetization of vacation leave credits up to a maximum of thirty (30) days, the limit recognized for exemption of said monetization is only up to ten (10) days in the absence of an implementing regulation increasing said limit. (BIR Ruling No. DA-245-99 dated April 19, 1999) Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)