BIR Ruling [DA-250-04]

May 12, 2004 BIR RULING [DA-250-04] RR 10-2000; 061-99 The International Commercial Bank of China 3/F Pacific Star Building Sen. Gil Puyat Ave., cor. Makati Ave. Makati City Attention: Mr. Chia-Jang Liu Vice President & General Manager Gentlemen : This refers to your letter dated May 23, 2002 requesting for a ruling as to whether or not the meal allowance paid to rank and file employees at one time lump sum are tax exempt to the employees and also be considered as deductible expense to the bank for income tax purposes. It is represented that the International Commercial Bank of China Manila Branch (ICBC) gives daily to the rank and file employees P80.00 each as meal allowance in addition to the regular salaries/wages of the employees; that this meal allowance is required to be supported by receipts; that at present, because of the high cost of living, the employees are experiencing difficulties to secure receipts as often times they purchase the food from sidewalk vendors or carenderia that do not issue receipts; that with the P80.00 daily meal allowance the employees cannot afford to buy their food from restaurants that issue receipts; that now, ICBC intends to give the meal allowance at one time lump sum or P80.00 times the number of banking days of the month without requiring the submission of supporting receipts thereon. In reply, please be informed that pursuant to Section 2.78.1 (A) (2) of Revenue Regulations No. 2-98, as amended by RR 8-2000 and RR 10-2000, on Withholding of Income Tax on Compensation where a person receives a salary for remuneration for services rendered, and in addition thereto, living quarters or meals are provided, the value to such person of the quarters and meals so furnished shall be added to the remuneration paid for the purpose of determining the amount of compensation subject to withholding. However, if living quarters or meals are furnished to an employee for the convenience of the employer, the value thereof need not be included as part of the compensation income. aTcHIC Furthermore, under Section 2.78.1 (A) (3) of Revenue Regulations No. 2-98, facilities and 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 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. (BIR Ruling No. 061-99 dated May 5, 1999) Such being the case, the meal allowance of P80.00 per banking day, paid to rank and file employees at one time lump sum based on the number of banking days of the month without requiring the submission of supporting receipts thereon, are not considered as part of compensation subject to withholding tax since the same are of relatively small value and are furnished to the employees for the convenience of the employer. Revenue Regulations No. 8-2000 provides, viz. : "THE AMOUNT OF DE MINIMIS BENEFITS CONFORMING TO THE CEILING HEREIN PRESCRIBED SHALL NOT BE CONSIDERED IN DETERMINING THE P30,000 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 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." THaDAE thus the P80.00 per day meal allowance given in lump sum based on the number of banking days, classified as de minimis benefits constitute a deductible expense on the part of employer for income tax purposes. 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.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group