BIR Ruling [DA-285-96]

July 30, 1996 BIR RULING [DA-285-96] Balmeo Bautista & Peasales Rm. 309 Margarita Bldg. J.P. Rizal cor. Cardona Sts. Makati City Attention: Atty . Lovell R . Bautista Gentlemen : This refers to your letter dated March 19, 1996 stating that your client, Pepsi-Cola Products Philippines, Inc. has an ongoing promotion program particularly directed to its salesmen in attaining their sales target; that the mechanics of the program are as follows: (1) Salesmen who attain their monthly sales target are entitled to a "company lotto ticket" which are drawn every week; (2) Holders of a winning "company lotto ticket" will be awarded a prize in the form of goods valued at P500.00 or more. In connection therewith, you are requesting a ruling as to whether or not said prize will be subject to a final tax of 20% under Section 21 (c)(1) of the Tax Code or to the withholding tax on wages considering that there exist an employer employee relationship between the salesmen and the company. In reply thereto, please be informed that since the prize in the form of goods valued at P500.00 or more are given as consideration for services rendered by the salesmen to Pepsi-Cola Products Philippines, Inc., the said equivalent amount of the prize shall be considered part of compensation income/wages subject to withholding tax prescribed by Section 72, Chapter 10, Title II of the Tax Code, as amended. [BIR No. 155-89 dated July 25, 1989] cdtech Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Rev. Executive Assistant Legal Service