BIR Ruling [DA-357-03]

October 10, 2003 BIR RULING [DA-357-03] RR 2-98 DA 617-99 Bayer Philippines, Inc. Bayer House Canlubang Industrial Estate Calamba, Laguna Attention: Ms. Marie Espana Human Resource Department Gentlemen : This refers to your letter dated July 4, 2003 stating that your company grants to its female employees, maternity leave benefits of 60 days and 78 days for normal delivery and/or caesarian, respectively pursuant to R.A. No. 1161, otherwise known as the SSS Law, as amended by R.A. No. 7322; that the company pays 100% of the employee's basic salary while she is on leave, consequently, SSS reimburses the company for a certain portion of the salary paid to the employee during her absence based on the employee's SSS contributions; and that the remaining portion of the salary paid to the employee not reimbursed by the SSS is the amount you want to confirm if subjected to withholding tax. Thus, Daily Rate x 60 days (for normal delivery) Amount of salary lost due to maternity leave = Pxxx Less: Maternity benefits received from The Social Security System xxx Difference = additional maternity benefits xxx ==== In reply thereto, please be informed that this Office had already occasioned to rule on the matter when it said in BIR Ruling No. DA617-99 dated November 3, 1999 that " . . . facilities or privileges (such as 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 32(B)(7)(e)(iv) of the Tax Code of 1997. ECDaAc "Such being the case, the additional maternity benefits being granted to the rank and file female employees of Mercury Group of Companies, Inc. and its subsidiary companies are not considered compensation income/wages. Accordingly, the same are not subject to withholding tax prescribed by Section 79 in relation to Section 24(A) both of the Tax Code of 1997 since the allowances are relatively of small value and offered by the employer to promote the health and efficiency of its employees. (BIR Ruling Nos. 370-92; DA303-99) Considering that the additional maternity benefits to be given to the female employees of Bayer Philippines, Inc. are in all fours similar to the above-cited cases, this Office is of the opinion as it hereby holds that the aforesaid benefits are not subject to income tax and consequently to withholding tax prescribed in Section 79 of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98, as amended. 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 null and void. HSTCcD Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group