BIR Ruling [DA-190-01]

October 17, 2001 BIR RULING [DA-190-01] 32 (B) (7) (f) Philippine Heart Center East Avenue, Quezon City Attention: Ms. Corazon M. Perez Acting Chief, Accounting Division Gentlemen : This refers to your letter dated April 14, 1999 requesting for a ruling on the following issues: 1. Whether or not the contributions of the Philippine Heart Center (PHC) employees for GSIS, Pag-ibig, and Medicare are deductible from their total taxable gross compensation income ?; 2. Whether or not PHC is entitled to a refund, if these contributions are considered as non-taxable income for the year 1998 ?; 3. Whether or not PHC may refund the amount representing the contributions of its employees and deduct the same from its remittances ? In reply, please be informed that Section 32(B)(7)(f) of the Tax Code of 1997 provides that GSIS, SSS, Medicare and Pag-ibig contributions, and union dues of individuals are excluded from the computation of gross income. Such being the case, the contributions of PHC employees for their GSIS, Pag-ibig and Medicare shall not be included as part of their gross compensation income for purposes of computing the withholding tax. Thus, where the remittances made by PHC of the withholding tax on wages of its employees included contributions for GSIS, Pag-ibig and Medicare, a claim for refund or credit of the overpayment of withholding tax is in order. Refund by PHC directly to its employees of the amount of withholding tax corresponding to the contributions of its employees for GSIS, Pag-ibig and Medicare, is allowable if PHC made adjustments at the end of calendar year 1998. However, if PHC failed to make year-end adjustments, the available remedy of the individual employee is to make a claim for refund pursuant to Section 204(C) of the Tax Code of 1997. Please be guided accordingly. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner (Legal and Inspection Group)