BIR Ruling [DA-205-02]

November 14, 2002 BIR RULING [DA-205-02] RMC No. 4-99 234-90 dated Dec. 14, 1990; UN345-95 dated August 10, 1995; UN440-95 dated Dec. 13, 1995 Office of the Deputy Ombudsman for the Military 1610 J.P. Laurel Street Malacaang Annex Building San Miguel, Manila Attention: Ms. Erlinda C. Bernabe Accountant III Gentlemen : This refers to your letter dated January 30, 2002 requesting for a ruling as to whether or not the backwages and other benefits awarded to Atty. Purificacion A. Baring-Tuvera for the period September 24, 1999 to March 24, 2000 are exempt from income tax and consequently from withholding tax. It is represented that Atty. Purificacion A. Baring-Tuvera, a lawyer-employee of the Office of the Deputy Ombudsman for Military was charged administratively for alleged Grave Misconduct, Conduct Prejudicial to the Best Interest of the Service Gross Violation of Existing Civil Service Rules and Reasonable Office Regulations for knowingly, willfully and maliciously writing the Honorable Ombudsman an utterly baseless, offensive, discourteous, disrespectful and contemptuous letter dated August 26, 1999 imputing partiality and bias on his part and on the Honorable Overall Deputy Ombudsman and was accordingly placed under preventive suspension from September 24, 1999 to March 24, 2000 or a period of six (6) months without pay effective upon receipt of the Order dated September 13, 1999; and subsequently, she was exonerated of the charge and was declared to be entitled to backwages and other benefits by the Court of Appeals. SCHATc In reply thereto, please be informed that an employer making payment of wages or compensation shall deduct and withhold from such compensation a tax determined in accordance with the prescribed new withholding tax tables under Revenue Memorandum Circular No. 4-99 ( Section 79 of the Tax Code of 1997, as implemented by Section 2.58.6 of Revenue Regulations No. 2-98, as amended ). The term "compensation" means all remuneration for services performed by an employee for his employer under an employer-employee relationship, unless specifically excluded by the Tax Code. Accordingly, the aforesaid back wages to be paid to Atty. Purificacion A. Baring-Tuvera for the period starting September 24, 1999 up to March 24, 2000 or a period of six (6) months constitute remuneration for services that are subject to withholding tax on wages prescribed in Section 79 of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98, as amended. Such being the case, Atty. Purificacion A. Baring-Tuvera shall report such income as she files the corresponding annual income tax returns thereon and pays the respective income taxes thereon by allocating or spreading the back wages for the years September 24, 1999 up to March 24, 2000, crediting in the process the corresponding income tax withheld from said wage payments. ( BIR Ruling No. 234-90 dated December 14, 1990; UN345-95 dated August 10, 1995; UN440-95 dated December 13, 1995 ) 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 null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal & Inspection Group