BIR Ruling [DA-230-02]

December 3, 2002 BIR RULING [DA-230-02] Ms. Myrna E. Sobremonte Chief, Accounting Division BIR/NOB M a d a m : This refers to your letter dated November 19, 2002, requesting clarification regarding the proper treatment of the P9,000.00 extra Christmas bonus for the CY 2001 as authorized by Pres. Gloria Macapagal-Arroyo in her Memorandum dated June 26, 2001 and the P4,000.00 clothing allowance, for purposes of computing the amount of withholding tax to be deducted from each employee of the Bureau of Internal Revenue. In reply, please be informed that under Revenue Regulations No. 8-2000, which amended certain sections of Revenue Regulations No. 2-98, as amended, the following among others, are considered as "de minimis" benefits not subject to withholding tax on compensation income of both managerial and rank and file employees: (a) . . . (b) . . . (c) . . . (d) Uniform and clothing allowance not exceeding P3,000.00 per annum; (e) . . . (f) . . . (g) . . . (h) Gifts given during Christmas and major anniversary celebrations not exceeding P5,000.00 per employee per annum; (i) . . . (j) . . . The said revenue regulations also provides that "The amount of the "de minimis" benefits conforming to the ceiling herein prescribed shall not be considered in determining the P30,000.00 ceiling of "other benefits" provided under Section 32(B)(7)(e) of the code. However, if the employer pays more than the ceiling prescribed by these regulations, the excess shall be taxable to the employee receiving the benefits only if such excess is beyond the P30,000.00 ceiling. Provided, further, that any amount given by the employer as benefits to its employees, whether classified as de minimis benefits or fringe benefits, shall constitute as deductible expense upon such employer. aCATSI Accordingly, since the clothing allowance and Christmas bonus given to BIR employee in 2001 exceeded the ceiling prescribed in said revenue regulations, the excess of P1,000 (for clothing allowance) and P4,000 (for Christmas bonus) are subject to income tax and consequently to the withholding tax, if the excess amounts when added to the "other benefits" of the concerned employee, amounted to is more than the P30,000.00 ceiling. Conversely, if the said excess amounts when added to the "other benefits" do not exceed the P30,000.00 ceiling, the same is not taxable to the employee receiving the same. Please be guided accordingly. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service