BIR Ruling [DA-169-99]

March 19, 1999 BIR RULING [DA-169-99] Bicol University Administrative Support Services Division Legaspi City Attention: Mr . Jose A . Rico Administrative Officer Gentlemen : This refers to your letter dated April 17, 1996 which was endorsed to this Office by the Office of the President requesting in effect for a ruling as to whether or not the additional allowance of P500.00 granted to government officials and employees with Salary Grade up to Grade 25 pursuant to Administrative Order No. 53 is subject to income and withholding tax deduction even if the said allowance has not yet been integrated to the basic pay of the government officials and employees concerned. It is represented that you did not subject the said additional allowance to income and withholding tax deduction by reason of Item No. 1(1.2) of Administrative Order No. 53; and that the BIR Revenue Region No. 5, Legaspi City, however, would not accept the filing of Income Tax Returns of taxpayers whose gross compensation income do not reflect or include said additional compensation allowance. In reply, please be informed that the Five Hundred Pesos (P500.00) additional compensation per month granted to government officials and employees beginning May 1, 1993 with Salary Grade up to Grade 25 under Administrative Order No. 53 is in the nature of compensation as explicitly provided in the first "WHEREAS Clause" of the said Order. However, Item No. 1 (1.2) of the said Order provides, viz: "This Administrative Order is issued to extend the same privilege to the rest of the personnel of the government, which shall partake of an allowance and not subject to GSIS, HDMF Fund premiums and income tax deductions pending its formal integration into the basic pay of the subject government personnel." (emphasis supplied) Such being the case, the said P500.00 additional compensation shall be subject to income tax and consequently to the withholding tax prescribed under Section 72 of the Tax Code, as amended, and as implemented by Revenue Regulations No. 6-82, as amended. However, the withholding of the tax thereon shall be made only as of the time of its formal integration into the basic pay of the subject government personnel, with Salary Grade up to Grade 25. [BIR Ruling No. 006-95 sated January 16, 1995] dctai Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)