BIR Ruling [DA-192-98]

May 15, 1998 BIR RULING [DA-192-98] Philippine Coconut Authority Agricultural Research and Development Branch Albay Research Center Banao, Guinobatan, Albay Attention: Ms . Ester P . Pacumbaba Officer-in-Charge Gentlemen : This refers to your faxed letter dated June 30, 1997 requesting for ruling as to whether or not the P500.00 additional compensation per month granted to government officials and employees with salary grade up to Grade 25 as provided for under Administrative Order No. 53, issued on May 17, 1993, is subject to income tax. llcd 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 allowance shall be subject to income tax and consequently to the withholding tax prescribed under Section 72 of the Tax Code, as amended [now Section 79 of the Tax Code of 1997]. However, the withholding of the tax thereon shall only be made 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 dated January 16, 1995) Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)