BIR Ruling [DA-264-01]

December 19, 2001 BIR RULING [DA-264-01] The Regional Director Revenue Region No. 17 Butuan City Attention: Chief, Legal Division S i r : This refers to the Particulars of Concern indicated in your Summary Report of Staff Meetings Discussions for the month of April, 2001 regarding the following: 1. Response on the query of Senior Citizens; and 2. Response on the classification of monetization for leave of absence in excess of 10 days is taxable. In reply, please be informed as follows: 1. We have not received from your end the alleged query of Senior Citizens. Nonetheless, if the questions are (A) whether or not a Senior Citizen can be claimed as qualified dependent as ruled in the Agripino Bayabay case (CTA Case No. 5280 promulgated on December 20, 1996; and (B) whether "married" or "head of the family" exemption status will allow a taxpayer to claim as additional exemption his father and/or mother who are senior citizens as dependents in addition to the qualified dependent children, our answers are as follows: A. For purposes of basic personal exemption, a single or legally separated individual with no dependent may claim the said senior citizen as his/her dependent for as long as the latter is living with and chiefly dependent upon him/her for support, such that, the taxpayer can claim the basic personal exemption allowable to a "head of a family". However, as to whether the said "head of a family" may claim an additional exemption for said dependent, the answer is in the negative. cDACST B. The second query is likewise, answered in the negative taking into consideration that additional exemption is limited only to those "heads of a family" or "married" individuals with qualified dependent children under Section 35(B) of the 1997 Tax Code (then Section 29(1)(2)(A) of the Tax Code, as amended). 2. Quoted hereunder is Sec. 2.78.1(A)(3)(a) of Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 8-2000, as further amended by Revenue Regulations No. 10-2000, viz: "Section 2.78.1. Withholding and Income Tax on Compensation Income "(A) . . . "(1) Compensation paid in kind. . . . xxx xxx xxx "(3) Facilities and privileges of relatively small value. xxx xxx xxx "The following shall be considered as "de minimis" benefits not subject to INCOME TAX AS WELL AS withholding tax on compensation income of both managerial and rank and file employees: "(a) Monetized unused vacation leave credits of PRIVATE employees not exceeding ten (10) days during the year AND THE MONETIZED VALUE OF LEAVE CREDITS PAID TO GOVERNMENT OFFICIALS AND EMPLOYEES; xxx xxx xxx It is clear, therefore, that monetized unused vacation leave credits of private employees of ten (10) days or less which are paid during the year are not subject to income tax and to the withholding tax. Conversely, if the monetized unused vacation leave credits of said private employees exceed ten (10) days, then the excess shall be subject to income tax and consequently to the withholding tax. In contrast, monetization of vacation and sick leave credits of government officials and employees even in excess of ten (10) days are not subject to income tax and to the withholding tax. Please be guided accordingly. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Acting Assistant Commissioner Legal Service