BIR Ruling [DA-372-99]

June 22, 1999 BIR RULING [DA-372-99] Ms. Myrna E. Sobremonte Chief, Disbursement Accounting Division Bureau of Internal Revenue Quezon City M a d a m : This refers to your letter dated April 7, 1998, requesting opinion on the queries posed therein. In reply thereto, please be informed as follows: 1. Under SEC 2.33 (A) of Revenue Regulations No. 3-98, "managerial employee" is defined as one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, layoff, recall, discharge, assign or discipline employees. On the other hand, "supervisory employees" are those who, in the interest of the employer, effectively recommend such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but requires the use of judgment. Under the aforequoted definition, it would seem that the salary grade of an employee is not a criteria for purposes of determining whether he/she is a managerial or supervisory employee. As long as his/her duties involve the exercise of discretion in the performance of the functions of the government as distinguished from one performing clerical or routinary work, he/she is liable to the fringe benefit tax on the grossed-up monetary value of fringe benefits granted or furnished by the employer. 2. The fringe benefit tax is imposed on the grossed-up monetary value of fringe benefit furnished, granted or paid by the employer to the employee, except rank and file employees. Logically, if there is no appropriation for the grant of fringe benefit to the employee, then there is no fringe benefit tax to speak of. 3. A motor vehicle, assigned to a BIR official is intended not for his personal use but in connection with the performance of his official duties or functions. As such, the assignment of such motor vehicle is not subject to the fringe benefit tax because the same is for the convenience or advantage of the BIR. 4. In Opinion No. 67, S. of 1998 of the Secretary of Justice regarding the correct interpretation of Section 282 of the Tax Code of 1997, it was ruled therein that "Considering that R. A. 8424 does not contain provisions providing for retroactive application, we believe that the said law should not be given retroactive effect. Therefore, the pending cases that have been endorsed to the Committee on Rewards, assuming that the information on which they are based have led to the realization of taxes/duties, prior to the effectivity of R . A . No . 8424, cannot be subject to its provisions ." (Emphasis supplied) Accordingly, informer's cases already approved by the Department of Finance including those already endorsed but pending in said Office shall not be subject to the 10% final withholding tax even if the payment of the cash reward to the informer shall be made in 1998 as long as the recovery of taxes, surcharges fines and/or penalties on account of the information filed by the informer was made prior to 1998. Please be guided accordingly. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue