BIR Ruling [DA-199-01]
BIR Ruling [DA-199-01] • Bureau of Internal Revenue (BIR) Issuances • Rulings (Unnumbered) • Oct 19, 2001
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October 19, 2001 BIR RULING [DA-199-01] RR 2-98 Chan Robles & Associates Law Firm 21/F Philippine Stock Exchange centre Tektite East Tower, Exchange Road Ortigas Center, Pasig City Attention: Atty. Jade Ferrer Wy Gentlemen : This refers to your letter dated November 14, 2000 requesting for a ruling on whether or not the longevity pay granted by your client, National College of Business and arts (NCBA), to its employees falls under the definition of "Other benefits" and therefore exempt from withholding tax. It is represented that the longevity pay is paid together with the 13th month pay of NCBA's employees beginning on their sixth (6th) year of service as follows: Years of Service Longevity Pay 5-9 month 10-4 1 month 15-19 1 month 20-24 2 months 25-29 2 months In reply, please be informed that the phrase "Other benefits" includes Christmas bonus, productivity incentive bonus, loyalty award, gifts in cash or in kind and other benefits of similar nature actually received by officials and employees of both government and private offices. (Section 2.78.1(11)(b) of Revenue Regulations No. 2-98) Longevity pay is in the nature of a loyalty award since the benefit is granted to employees of NCBA who have rendered the required number of years of service. Thus, it is within the contemplation of the term "Other benefits". As such, the value of the other benefits when added to the thirteenth month pay must not exceed the threshold of Thirty thousand pesos (P30,000.00) in order that it may be exempt from income tax and consequently from the withholding tax. Moreover, if the value exceeds the Thirty thousand pesos (P30,000.00) ceiling, then the excess of the other benefits and the thirteenth month pay is considered as part of compensation subject to income tax and consequently to the withholding tax. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group
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