BIR Ruling [DA-200-96]

June 18, 1996 BIR RULING [DA-200-96] Asia Textile Mills, Inc. Km. 51, San Cristobal Calamba Laguna Attention: Mr . Ardie Umandap Union President ATMI - Independent Gentlemen : This refers to your letter dated December 5, 1995 requesting for a ruling as to whether or not the signing bonus is exempt from income tax. It appears that the Collective Bargaining Agreement between the Management and the Certified Collective Bargaining Unit of your company have a signing bonus provision, which is to be given twice for every five (5) years, to daily paid, monthly paid and supervisory employees in the respective average amounts of P800.00; P1,000.00; and P1,200.00. In reply, please be informed that pursuant to Section 3 of Revenue Regulations No. 2-95 implementing Republic Act No. 7833 otherwise known as "An Act to Exclude the Benefits Mandated Pursuant to R.A. No. 6686 and P.D. 851, as amended, and other Benefits from the Computation of Gross Compensation Income for purposes of determining taxable Compensation Income", the following benefits shall be excluded from the gross compensation income, viz: cdll a. 13th month pay equivalent to the mandatory one (1) month basic salary of officials and employees of the Government (whether national or local), including government owned and controlled corporations and of private offices received after the 12th month pay beginning calendar year 1994; and b. Other benefits such as christmas bonus given by private offices to their officials and employees, 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 in an amount not exceeding Twelve Thousand Pesos (P12,000.00) for one (1) calendar year. The above-stated exclusions (a) and (b) shall cover benefits paid or accrued beginning January 1, 1994 but shall be limited only to an amount not exceeding Twelve Thousand Pesos (12,000.00) in the case of the "other benefits" contemplated under paragraph (b) above, provided, however, that when added to the 13th month pay, the total amount of tax exempt benefits shall not exceed Thirty Thousand Pesos (P30,000.00). In other words, for purposes of determining whether the aforementioned signing bonus of P800.00, P1,000.00 and P1,200.00 shall be exempt from income tax, the aggregate amount shall be added to the "other benefits" that the employees will receive for the calendar year 1995 but said "other benefits" shall be limited only to an amount not exceeding P12,000.00, provided, however that the "other benefits" when added to the 13th month pay, the total amount of tax exempt benefits shall not exceed P30,000.00. (BIR Ruling No. 167-95 dated October 24, 1995) Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)