BIR Ruling [DA-166-96]

May 10, 1996 BIR RULING [DA-166-96] Philippine Hanse Ship Agency, Inc. 28 Lapulapu Avenue Magallanes Commercial Area Makati City Gentlemen : This refers to your letter dated December 19, 1995 requesting for a ruling that the monthly rice allowance given to your employees are not subject to income tax and consequently to withholding tax and that the cash amount increased from Four Hundred Sixteen Pesos (P416.00) to One Thousand Pesos (P1,000.00) be considered as the cash equivalent or the prevailing/present price of one (1) sack of rice. In reply, please be informed that facilities or privileges (such as entertainment, medical services, or so-called courtesy discounts on purchases) 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 merely as a means of promoting the health, goodwill, contentment, or efficiency of his employees 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. Such being the case, and since the grant of P1,000.00 for rice allowance is of relatively small value and furnished merely as a means of promoting the health, goodwill and contentment or efficiency of your employees, the same is not considered compensation income subject to the withholding tax prescribed by Section 72 in relation to Section 21 (a) of the Tax Code, as implemented by Revenue Regulations No. 6-82, as amended. (BIR Ruling No. 28/278-92/029-93 dated January 15, 1993) Very truly yours, (SGD.) ALICIA P. CLEMENO Assistant Commissioner (Legal Service)