BIR Ruling [DA-315-97]

September 10, 1997 BIR RULING [DA-315-97] Philippine Bank of Communications 214-216 Juan Luna Street Binondo, Manila Attention: Ms. Celia Jessica L. Villarosa Senior Vice President Gentlemen : This refers to your letter dated March 3, 1997 requesting, in effect, for ruling as to whether the monthly allowance of P300.00, or P3,600.00 per year, in lieu of the rice subsidy given to your employees are exempt from withholdings tax. It is represented that the Philippine Bank of Communications has agreed to provide to its employees in Visayas and Mindanao who are members of the Cebu Kaoton-Bank Employees' Association, the employees' union, financial assistance of P300.00 per month, or P3,600.00 per year, in lieu of the rice subsidy; and that this financial assistance was meant as a "supplement'' and was primarily intended as a means of promoting the health, goodwill and efficiency of your employees. In reply, please be informed that pursuant to Section 28 (b) of the Tax Code, as amended by R.A. 7833, the 13th month pay and other benefits in the aggregate amount not exceeding P30,000 received by an official or employee of private corporations and entities paid or accrued beginning January 1, 1994 are exempt from income tax and consequently from the withholding tax on wages. The term "other benefits" shall refer to all benefits other than the 13th month pay, such as, the annual Christmas bonus given by private offices, 14th month pay, mid-year productivity incentive bonus, gifts in cash or in kind and other similar benefits received by an official or employee for one calendar year in an amount exceeding Twelve Thousand Pesos (P12,000). aESIHT Accordingly, the financial assistance of P300.00 per month, or P3,600.00 per year, in lieu of rice subsidy given primarily to promote the health, goodwill contentment and efficiency of your employees is within the contemplation of ''other benefits'' provided for under Section 28 (b) (8) (F) of the Tax Code, as amended, and therefore, need not form part of your employee's compensation subject to withholding tax on wages under Section 2 (a) of Revenue Regulations No. 6-82, as recently amended by Revenue Regulations No. 4-93, implement R.A. 7497, amending Section 72 of the Tax Code; provided, however, that said amount together with the other benefits in the aggregate shall not exceed P12,000.00 and that when added to the 13th month pay, the total amount of tax exempt benefits shall not exceed P30,000.00 (BIR Ruling No. 24-95 dated February 14, 1995). Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV OIC, Assistant Commissioner (Legal Service)