BIR Ruling [DA-278-96]

July 25, 1996 BIR RULING [DA-278-96] Mr. Jose A. Rico Bicol University Legaspi City S i r : This refers to your letter dated April 12, 1996 to the Honorable Secretary, Department of Finance, Manila which was referred to this Office on May 14, 1966 requesting a ruling as to whether or not the grant of additional compensation in the amount of P500.00 pursuant to Administrative Order No. 53 dated May 17, 1993 is subject to income tax and consequently to the withholding tax on wages even if said compensation has not as yet been integrated to the basic pay of the government personnel. It is represented that the Bicol University did not subject the additional compensation in the amount of P500.00 per month granted to public school teachers to income tax and withholding tax on wages because the same has not as yet been integrated into the basic pay of said government personnel, and that Revenue Region No. 5, Legaspi City is not accepting income tax returns of taxpayers which does not reflect the additional compensation of P500.00 per month. In reply, please be informed that the Five Hundred Pesos (P500.00) additional compensation per month granted to government officials and employees beginning May 1, 1993 with salary grade up to Grade 25 under Administrative Order No. 53 is in the nature of compensation as explicitly provided in the first "WHEREAS clause" of the said order. However, Item No. 1 (1/2) of the said Order provides, viz. "This Administration Order is issued to extend the same privilege to the rest of the personnel of the government, which shall partake of an allowance and not subject to GSIS, HDMF Fund premiums and income tax deductions pending its formal integration into the basic pay of the subject government personnel" (Emphasis supplied) Such being the case, the said P500.00 additional compensation shall be subject to income tax and consequently to the withholding tax prescribed under Section 72 of the Tax Code, as amended, as implemented by Revenue Regulations No. 6-82, as amended. However, the withholding of the tax thereon shall be made only as of the time of its formal integration into the basic pay of the subject government personnel with salary grade up to Grade 25 (BIR Ruling No. 006-95 dated January 1, 1995) Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Rev. Executive Assistant Legal Service