BIR Ruling [DA-175-96]

May 22, 1996 BIR RULING [DA-175-96] Parsons International Limited 10/F Rufino Pacific Tower 6784 Ayala Avenue Makati City Attention: Mr. Gil P. Bangalan Human Resources Manager Gentlemen : This refers to your letter dated August 29, 1995 requesting for a ruling on whether the subsistence allowance which includes cost of the employee's meals, laundry, and other incidental expenses of P180.00 per day and lodging and housing allowance of P120.00 per day which you give to your employees, are exempt from withholding tax on compensation income. It is represented that the nature of your business involves engineering, project and construction management; that your company assigns employees to project sites in various regions and provinces in the Philippines; that as such, you provide your employees who are assigned and relocated to the project sites "project allowances" to defray their personal expenses. It is your opinion though that the aforementioned allowances, being so small and intended merely as a means of promoting the health, goodwill, contentment and efficiency of the said employees, should not form part of the compensation income subject to withholding tax. In reply, please be informed that 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, "facilities or privileges" furnished or offered by an employer to his employees 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. aDACcH In view thereof, this Office is of the opinion that the aforesaid allowances being given by your company to its employees, i.e., subsistence allowance of P180.00 per day and lodging and housing allowance of P120.00 per day, which are indeed of "relatively small value", need not be included as compensation subject to withholding tax since they are given merely to promote the health, goodwill, contentment and efficiency of the employees. (BIR Ruling No. 553-93 dated December 29, 1993) Very truly yours, (SGD.) ALICIA P. CLEMENO Assistant Commissioner (Legal Service)