BIR Ruling [DA-303-99]

May 19, 1999 BIR RULING [DA-303-99] Southern Leyte Provincial Hospital Provincial Health Office Maasin, Southern Leyte Attention: Ms. Adelaida Amarga-Asperin Provincial Health Officer II Gentlemen : This refers to your letters dated June 17, 1997, July 17, 1997 and August 28, 1997 requesting that subsistence allowance received by health workers be exempted from income tax, and consequently from withholding tax. It is represented that during the Mancom meeting attended by the provincial health officers at the Regional Health Office No. 8, Candahug, Palo, Leyte last July 15, 1997, a BIR team discussed that subsistence allowance of P30/day should not he included in the computation of an employee's taxable compensation income; and that it is only the Southern Leyte Health personnel who are including subsistence allowance in the computation of their gross income. In reply, please be informed that facilities or privileges (such a entertainment, medical services, or so called courtesy discounts on purchases) furnished or offered by an employer to his employees, generally, are not considered as compensation subject to withholding tax if such facilities or privileges are of relatively small value and are offered or furnished by the employer merely as a means of promoting the health, goodwill, contentment, or efficiency of his employees pursuant to Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 3-98 implementing Section Sec. 32 (B)(7)(e)(iv) of the Tax Code of 1997. TSHIDa Such being the case, the amount of subsistence allowance received by health workers are not considered compensation income/wages. Accordingly, it is not subject to the withholding tax prescribed by Section 79 in relation to Section 24(A) both of the Tax Code of 1997 since the said allowance is relatively of small value and offered by the employer to promote the health and efficiency of its employees. (DA 11-97 dated January 9, 1997) Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)