BIR Ruling [DA-245-99]

April 19, 1999 BIR RULING [DA-245-99] PCCI Finance Corporation 2nd Floor, PCCI Bldg. 118 Alfaro Street, Salcedo Village Makati City Attention: Ms . Mary Ann J . Syjoco Manager/Head, Accounting Dept . Gentlemen : This refers to your letter dated March 6, 1997 stating that it is your company's existing policy to forfeit unused vacation leave credits accumulated for the year; that unused sick leave credits are, however, accumulated up to a maximum of forty five (45) days and the excess is automatically commuted to cash. cdlex You now would like to know whether BIR Ruling No. 099-92 is applicable to you and if the same applies to both sick leave and vacation leave. In reply, please be informed that pursuant to the said ruling, the monetized unused vacation leave credits not exceeding ten (10) days during the year is the limit recognized for exemption of such payment to the income tax and consequently to the withholding tax. This policy on vacation leave credits, is on account of conversion into money of the value of such leave credit to employees who opted not to go on leave. However, it does not apply to sick leave credits, considering that the same is earmarked on the contingency that an employee would have to actually go on leave by reason of sickness or other physical disability, in which case the choice not to avail of the same is not an option available to an employee. (See Joint Civil Service Commission and the Department of Budget and Management Circular No. 1.1, S. of 1991; BIR Ruling Nos. 031-92 dated January 23, 1991 and 099-92 dated March 20, 1992) This ruling is issued to clarify the issues concerning the exclusion from taxes of such monetized vacation leave and does not in anyway supplant your company's established policy or practices with respect to the vacation and sick leave credits of your employees. casia Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)