BIR Ruling [DA-287-04]

May 24, 2004 BIR RULING [DA-287-04] RR 2-98 BIR Ruling No. 59-2000 Aurora Integrated Area Devt. Project Phase 2 50-B H. Francisco St. San Francisco del Monte Quezon City Attention: Mr. Joseph C. Soniel Accountant IV Gentlemen : This refers to your letter dated February 18, 2000 and indorsed to this Office on February 24, 2000 by Revenue District Officer Aurora L. Amatorio of Revenue District No. 22, Baler, Aurora, stating "In line with our contractual employment here at AIADP2, some of our co-workers applied for SSS & PHIC as self-employed and some applied for GSIS in which employer's contribution is involved. Those who applied for SSS & PHIC were inquiring whether they could avail of the reduced tax base due to their personal contribution as self-employed. It should be noted that AIADP has no contributory share for them. They only applied as self-employed individuals. While we understand that for those who applied for GSIS, their taxable income will be reduced to the effect of the corresponding employee's share. . . ." In effect, the issue to be resolved is whether or not the taxable income of your contractual employees who applied for Social Security System (SSS) & Philippine Health Insurance Corporation (PHIC) will be reduced corresponding to their contribution to the SSS and PHIC. In reply, please be informed that Section 2.78.1 (B)(1)(e) of Revenue Regulations No. 2-98 provides that income payments of benefits made under the Social Security System Act of 1964, as amended, are exempt from the requirement of withholding tax on compensation. Moreover, Section 34(M) of the Tax Code of 1997 provides that in computing taxable income subject to income tax, the amount of premiums not exceeding P2,400 per family or P200 a month paid during the taxable year for health and/or hospitalization insurance taken by the taxpayer for himself, including his family, shall be allowed as a deduction from his gross income: Provided , That said family has a gross income of not more than P250,000 for the taxable year: Provided, finally, That in the case of married taxpayers, only the spouse claiming the additional exemption for dependents shall be entitled to this deduction. Accordingly, in computing the income tax due from your contractual employees who applied for SSS and PHIC for purposes of filing their respective income tax returns, their SSS contribution should be exempt from withholding tax while the amount of their PHIC premiums not exceeding P2,400 per family or P200 a month paid during the taxable year shall be allowed as a deduction from their gross income subject to the above conditions. cIADTC 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