BIR Ruling [DA-219-00]

April 10, 2000 BIR RULING [DA-219-00] RR 2-98 & 3-98 DA-026-99; BIR Rlng. 61-99 DA-219-2000 Balmeo Bautista & Peasales Law Offices 3rd Floor Margarita Building J.P. Rizal cor. Cardona Streets 1208, Makati City Attention: Atty . Leonides Balmeo Gentlemen : This refers to your follow up letter dated March 6, 2000 correcting your original request dated January 20, 2000 for exemption from fringe benefit and withholding tax on compensation of meal allowance in the amount of P950.00 per month to be given to all the employees of ABB group of companies in the Philippines to that of one (1) sack of rice. It was originally represented that ABB group of companies in the Philippines are 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 more or less 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, 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 facilities or privileges are of relatively 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, a sack of rice which ABB group of companies in the Philippines agreed to give to their employees, is not considered 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 health, goodwill, contentment and efficiency of its employees. (BIR Ruling DA-026-99 dated January 18, 1999) cdll Moreover, a sack of rice which ABB group of companies agreed to give to all their employees, is not subject to the fringe benefits tax pursuant to Section 33(C) of the 1997 Tax Code, as implemented by Section 2.33(C) of Revenue Regulations No. 3-98, pertinent portion of which is as follows: "SEC. 2.33. SPECIAL TREATMENT OF FRINGE BENEFITS xxx xxx xxx "(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. Accordingly, a sack of rice granted to the rank and file employees of ABB group of companies in the Philippines, in such amount as may be allowable under existing rules and regulations is not subject to the fringe benefit tax the same being of relatively small value. Likewise, if the same benefit, i.e., sack of rice in the amount of P350.00 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, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group