BIR Ruling [DA-428-99]
BIR Ruling [DA-428-99] • Bureau of Internal Revenue (BIR) Issuances • Rulings (Unnumbered) • Jul 27, 1999
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July 27, 1999 BIR RULING [DA-428-99] Pambansang Korporasyon Sa Elektrisidad (National Power Corporation) Visayas Regional Center Jones Avenue, Cebu City 6000 Attention: Ricarte M. Polloso Finance Manager Gentlemen : This refers to your letter dated May 13, 1999 requesting for a ruling on whether or not the monetization of leave credits in excess of ten (10) days is subject to withholding tax. It is represented that the Joint CSC-DBM Circular Nos. 1, s. 1991 (Section 1, Rule 1) and 2-97 provided for the guidelines on monetization of unutilized leave credits; that Section 2, Rule IV, Circular No. 1 s. 1991 provides that an officer or employee shall be allowed to monetize a maximum of ten (10) working days vacation leave/service credits; that this was amended by Section 1, Rule IV, Circular No. 2-97 which provides that officials and employees in the career and non-career service, whether permanent, provisional, temporary or casual, shall be allowed to monetize a maximum of thirty (30) days vacation leave/service credits; and that the monetization of leave credits has been increased to 50% of an employees' vacation/sick leave balance under CSC Resolution No. 98-3142 as implemented by CSC Memorandum Circular No. 41 s. 1998. In reply, please be informed that pursuant to Section 2.78.1 (A)(7) of Revenue Regulations No. 2-98, the monetized value of unutilized vacation leave credits of ten (10) days or less which were paid to the employee during the year are not subject to income tax and to the withholding tax. HSCAIT Notwithstanding the fact that Section 1, Rule IV of the Joint CSC-DBM Circular No. 2-97 allowed the monetization of vacation leave/service credits up to a maximum of thirty (30) days, the limit recognized for exemption of said monetization is only up to ten (10) days in the absence of an implementing regulation increasing said limit. (BIR Ruling No. DA-245-99 dated April 19, 1999) Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)
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