BIR Ruling [DA-253-97]

July 29, 1997 BIR RULING [DA-253-97] Asian Theological Seminary 54 Scout Madrian Quezon City Attention: Mr. Johnathan RG. Valdezco Business Manager Gentlemen : This refers to your letter dated February 17, 1997 stating that Asian Theological Seminary is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission; that you were granted tax-exempt status last October 29, 1987 and that starting June 1, 1997, you are planning to give your employees rice, sugar and grocery allowance equivalent to P2,000.00. Based on the foregoing, you now request for a ruling on the tax consequence of the said allowances to be given to your employees. In reply, please be informed that pursuant to Section 28 (b) of the Tax Code, as amended by R.A. 7833, the "13th month pay" and "other benefits" in the aggregate amount not exceeding P30,000.00 received by officials and employees of the national government, local government units and agencies, including government-owned and controlled corporations and entities paid or accrued beginning January 1, 1994 are exempt from income tax, and consequently from the withholding tax on wages. The term "13th month pay" shall refer to the mandatory one month basic salary of an official or employee of the national government, local government units, agencies and instrumentalities, including government-owned and controlled corporations, and of private offices received after the 12th month pay, while the term "other benefits" shall refer to all benefits other than the 13th month pay, such as, the annual Christmas bonus given by private offices, 14th month pay, mid-year productivity incentive bonus, gifts in cash or in kind and other similar benefits received by an official or employee for one calendar year in an amount not exceeding Twelve Thousand Pesos (P12,000.00) as the maximum limit. Accordingly, the amount of P2,000.00 granted to each of your employees may be considered as falling within the contemplation of the term "other benefits" provided for under Section 28 (b) (8) (F) of the Tax Code as amended, and, therefore, need not form part of your employee's taxable compensation income subject to the withholding tax on wages under Revenue Regulations No. 6-82, as recently amended, by Revenue Regulations No. 4-93 implementing Republic Act No. 7497 amending Section 72 of the Tax Code, as amended, provided, however, that such "other benefits" inclusive of the P2,000.00 rice, sugar and grocery allowance, shall not, in the aggregate exceed P12,000.00; and that when added altogether to the 13th month pay, the total amount of tax exempt benefits shall not exceed P30,000.00 (BIR Ruling No. 024-95 dated February 14, 1995). Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV OIC, Assistant Commissioner (Legal Service)