BIR Ruling [DA-289-00]

July 24, 2000 BIR RULING [DA-289-00] RMC 12-97 120-96; 143-96 DA-289-2000 Ms. Guillerma G. Decena Arcillas, Upper Calarian Zamboanga City M a d a m : This refers to your letter dated July 20, 1998 relative to the tax treatment of certain benefits accorded to the members of the Armed Forces of the Philippines vis-a-vis the members of the Philippine National Police. In reply, please be informed that the disparity in the tax treatment particularly the exemption from tax of certain benefits (e.g. longevity pay, hazard pay and the cost of living allowance) granted to the members of the PNP and those of the members of the AFP has been clarified in Revenue Memorandum Circular No. 12-97 dated June 5, 1997. The same circular provides that benefits enjoyed by the uniformed personnel of the PNP are explicitly provided for under Sections 71 and 77 of Republic Act No. 6975, otherwise known as "An Act Establishing the Philippine National Police under a reorganized Department of the Interior and Local Government (DILG) of 1990." Pursuant to said Section 71, these uniformed men in the Department are entitled to certain benefits as quoted hereunder, viz: "SEC. 71. Longevity pay and Allowances . Uniformed personnel of the Department shall be entitled to a longevity pay of 10 percent (10%) of their Basic monthly salaries for every five (5) years of service, which shall be reckoned from the date of the personnel's original appointment in the AFP, or appointment in the police, fire jail or other allied services prior to the integration of the PC and the INP: Provided, that the totality of such longevity pay shall not exceed fifty percent (50%) of the basic pay. They shall also continue to enjoy the subsistence allowance, quarters allowance, clothing allowance, cost of living allowance, hazard pay, and all other allowances as provided by existing laws." These enumerated benefits are exempt from tax, as expressly stated in Section 77 of the same Act, viz: "SEC. 77. Exemption from Attachment and Taxes . All benefits granted by this Act, including benefits received from the Government Service Insurance System shall not be subject to attachment, levy, execution or any tax of whatever nature. " (Emphasis supplied) Thus, the exemption from tax of certain benefits enjoyed by these uniformed men in the PNP is expressly granted by R.A. 6975. (BIR Ruling No. 120-96 dated November 8, 1996) cdll On the other hand, although military personnel of the AFP are likewise enjoying such fringe benefits granted to the members of the PNP, whether monetary or non-monetary, which includes longevity pay. hazard pay and other kinds of allowances, the same are generally included as part of the taxable compensation income subject to withholding tax, except allowances for quarters, clothing and subsistence as clarified under Revenue Memorandum Circular No. 12-97. (BIR Ruling No. 143-96 dated December 24, 1996) Accordingly, it is hereby emphasized that claims by members of the PNP for tax exemption of the aforementioned benefits, such as quarters allowance, clothing allowance, cost of living allowance, hazard pay and longevity pay, shall be granted under the provision of RA 6975. On the other hand, claims for tax exemption by AFP personnel shall be limited to quarters, clothing and subsistence allowances. For the rest of the benefits enjoyed by military personnel, the same shall form part of their taxable compensation income subject to withholding tax. The power to make laws is vested with the Congress of the Philippines. The duty of this Office is merely to interpret, enforce or implement such laws. Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal & Inspection Group