BIR Ruling [DA-172-97]

April 16, 1997 BIR RULING [DA-172-97] Apti-Philippines, Inc. Suite 1801 MetroBank Plaza Sen. Gil Puyat Avenue Makati City 1200 Attention: Messrs . Shinichi Kanayama R & D Manager and Masayoshi Toyoshima Executive Vice President & Treasurer Gentlemen : This refers to your letter dated August 1, 1996 stating that your company is registered with the Board of Investment (BOI) as a pioneer export producer engaged in the research and development of microcodes for printers, etc.; that as your company is growing, it would like to maintain the morale and satisfaction of its employees, thus, you proposed to provide your employees with allowances in order to promote their health and efficiency, at work; and that you proposed the following allowances: 1. Meal allowance of P30.00 per day; 2. Rice allowance of P700.00 per month; and 3. Transportation allowance of P25.00 per day. which will be given to your employees every 24th day of the month. Based on the foregoing representations, you are now requesting for a ruling to the effect that the aforesaid allowances are exempt from withholding tax. 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 present value of one sack of rice is not less than P1,000.00 coupled with the ever increasing prices of oil, the rice allowance of P700.00 per month as well as the meal allowance of P30.00 per day and the transportation allowance of P25.00 per day are not considered compensation income/wages. Accordingly, since the said allowances are of relatively small value offered by your company merely as a means of promoting the health, goodwill and efficiency of your employees, they are not considered as compensation, hence, not 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, since the same are of relatively small value and offered by the employer to promote the health and efficiency of its employees. (BIR Ruling No. 029-93 dated January 15, 1993) aisadc Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)