BIR Ruling [DA-200-00]

April 3, 2000 BIR RULING [DA-200-00] RR 2-98 & 3-98 DA-026-99; BIR Rlng. 61-99 DA-200-2000 Balmeo Bautista & Peasales Law Offices 3rd Floor Margarita Building J.P. Rizal cor. Cardona Streets 1208 Makati City Attention: Atty. Leonides F. Balmeo Gentlemen : This refers to your letter dated January 20, 2000 requesting for a ruling to the effect that meal allowance of Php950.00 per month, is de minimis benefit, thus, exempt from the fringe benefit tax and withholding tax on compensation. It is represented that ABB group of companies in the Philippines is composed of Asea Brown Boveri, Inc., ABB Power, Inc., ABB Industry and ABB Koppel, Inc.; that of the four companies, ABB Industry and ABB Koppel have unionized labor organization whereby they were able to negotiate the grant of monthly meal allowance of Php950.00 or P36.54 per day; and that the new management plans to standardize the benefits to all ABB employees in the Philippines, including the employees of non-unionized companies, namely, Asea Brown Boveri, Inc. and ABB Power, Inc., by granting a meal allowance in the amount of P950.00 per month or P36.54 per day, to promote the health, contentment, efficiency and good working relations with the employees. 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 privilege are relatively of 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 Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 3-98 implementing Section 32(B)(7)(e)(iv) of the 1997 Tax Code. Such being the case, the amount of P950.00 per month meal allowance (or P36.54 per day) which the ABB group of companies propose to give to their employees is not considered income/wages. Accordingly, the same is not subject to the withholding tax prescribed by Section 79 in relation Sec. 24(A), both of the same Tax Code of 1997, since the said allowance is relatively of small value and offered by the respective employer to promote the health, goodwill, contentment and efficiency of its employees. (BIR Ruling Nos. 065-90 dated April 23, 1990 & 529-88 dated Nov. 11, 1988; DA-026-99 dated January 18, 1999) cdll Moreover, the P950.00 per month meal allowance (or P36.54 per day) which is being proposed to be given to the employees of ABB group of companies, is not subject to the fringe benefits tax pursuant to Section 33(C) of the Tax Code of 1997, as implemented by Section 2.33(C) of Revenue Regulations No. 3-98, pertinent provision of which is as follows: "SEC. 2.33. SPECIAL TREATMENT OF FRINGE BENEFITS "(A) . . . "(B) . . . "(C) Fringe Benefits Not Subject to Fringe Benefits Tax In general, the fringe benefits tax shall not be imposed on the following fringe benefits: "(1) Fringe benefits which are authorized and exempted from income tax under the Code or under any special law; "(2) Contributions of the employer for the benefit of the employee to retirement, insurance and hospitalization benefit plans; "(3) Benefits given to rank and file, whether granted under a collective bargaining agreement or not; "(4) De minimis benefits defined in these Regulations; "(5) If the grant of fringe benefits to the employee is required by the nature of, or necessary to the trade, business or profession of the employer; or "(6) If the grant of the benefit is for the convenience of the employee. Based on the foregoing. the monthly meal allowance in the amount of P950.00 granted to the rank and file is not subject to the fringe benefits tax the same being specifically exempted from the application thereof. Likewise, if the same benefit, i.e., the meal allowance of P950.00 per month is offered to supervisory, professional or technical employees, it shall not be subject to the fringe benefits tax it being considered de minimis benefit. (BIR Ruling No. 061-99 dated May 5, 1999) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be discovered that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)