BIR Ruling [DA-278-03]

August 22, 2003 BIR RULING [DA-278-03] Section 33 BIR Ruling No. 27-01 & 19-02 Pentax Luzon Phils. Corporation Special Export Processing Zone Gateway Business Park, Javalera General Trias, Cavite Attention: Ms. M. Precila N. Garcia Accounting & Administration Manager Gentlemen : This refers to your letter dated December 6, 2001 requesting for a ruling on the following: 1) Whether hospital expenses for your employee's accident inside company premises during company activity is subject to fringe benefits tax; and 2) Whether membership dues on the following associations are subject to benefits tax? a. Japanese Association Manila Inc. b. Japanese Chamber of Commerce You stated that your company is 100% Japanese-owned and a PEZA-registered enterprise under pioneer status; that in the early part of your company's sportsfest ceremonies, Mr. Kurita, an employee, tried to prevent the torch from falling; that the burning fuel and damaged torch fell on him, causing scalds and burns on his head, face and body; that he was brought to the nearest hospital; and that hospital expenses including doctor's fee and medicine will be paid by your company and accounted in your books. In reply, please be informed as follows: 1) To be considered as de minimis medical allowance that will neither be subject to fringe benefits tax in the case of managerial employees, or to income tax and consequently, withholding tax on compensation, in the case of rank-and-file employees, in accordance with Revenue Regulations (Rev. Regs.) No. 2-98, as amended by Rev. Regs. No. 10-2000, the following conditions must concur: a. The amount given to the employee shall be for his own medical expenses for a given taxable year; b. The amount actually given and actually spent shall not exceed Php10,000.00 in any given calendar year; and c. The employee must fully substantiate with official receipts in his name the medical allowance so granted, on or before the annualization of withholding taxes in any given calendar year (BIR Ruling No. 019-2002 dated May 9, 2002) . In view of the foregoing, the hospital benefits of Mr. Kurita due to an accident inside company premises during your company's sportsfest may be considered as de minimis medical allowance that will not be subject to fringe benefits tax provided that such benefits does not exceed the amount of de minimis benefits provided under Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 10-2000, and has been subjected to the appropriate withholding tax in accordance with Revenue Regulations 2-98, as amended (BIR Ruling No. 027-2001 dated June 20, 2001) and the hospital expenses are substantiated by official receipts or adequate records. 2) Membership fees, dues and other expenses borne by the employer for the employee in social and athletic clubs or other similar organizations are fringe benefits under Section 33(B)(6) of the 1997 Tax Code (BIR Ruling No. 025-2001 dated June 13, 2001). However, where the fringe benefits are required by the nature of, or necessary to the trade, business or profession of the employer, or is for the convenience or advantage of the employer, the benefit shall not be subject to the fringe benefits tax pursuant to Section 33 of the Tax Code of 1997 (BIR Ruling No. 055-99 dated April 23, 1999). 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group