BIR Ruling [DA-635-04]

December 15, 2004 BIR RULING [DA-635-04] 33; 055-99 Foreign Holiday Philippines, Inc. G/F, 1588 M.H. del Pilar corner Pedro Gil/Mabini Streets Malate, Manila Attention: Ms. Yvonne Lo Group Financial Controller and Treasurer Gentlemen : This refers to your letter dated October 25, 2004 stating that you are a new company duly incorporated in the Philippines; that you are engaged in transporting, entering and servicing visitors including fostering and promoting legitimate recreational, pleasure, social and cultural activities as well as entertainment of all kinds in Manila; that you endeavor to contribute in bringing more business in this part of the country through tourism and employment generation; that your company will grant housing units located within 50 meters from your place of business; that your employees who will reside in these housing units are required to be on-call due to the nature of your 24-hour business operation; and that the said housing units are located on the same mix-used building and owned by your sister company. In connection therewith, you now request for an opinion that the grant of housing units which is within 50 meters from the place of your business is not subject to the fringe benefits tax prescribed in Section 33 of the Tax Code of 1997. In reply thereto, please be informed that fringe benefits means any goods, service or other benefit furnished or granted by an employer in cash or in kind, in addition to basic salaries, to an employee (except rank and file employee) such as housing. Section 33(a) of the Tax Code of 1997 stipulates that fringe benefits which are "required by the nature of, or necessary to the trade, business or profession of the employer, or when the fringe benefit is for the convenience or advantage of the employer" are not subject to the fringe benefit tax. If the living quarters are furnished to an employee for the convenience of the employer, the value thereof need not be included as part of compensation income subject to withholding. Moreover, Revenue Regulations No. 3-98, Section 2.33(B)(1)(g), implementing Section 33 of the Tax Code of 1997 provides: "(g) A housing unit which is situated inside or adjacent to the premises of a business/factory shall not be considered as a taxable fringe benefit. A housing unit is considered adjacent to the premises of the business if it is located within the maximum of fifty-(50) meters from the perimeter of the business premises." It is clear from the foregoing that since it is a fringe benefit for your convenience and advantage, meaning the grant of the housing units to your employees, is within 50 meters from the perimeter of your business premises and that your employees are required to be on-call due to the nature of your business operation, said fringe benefit shall not be included as part of compensation income of the employee subject to withholding neither will it be subject to the fringe benefit tax under Section 33 of the Tax Code of 1997, as implemented by Revenue Regulations No. 3-98. ( BIR Ruling No. 055-99 dated April 23, 1999 ) SUCH BEING THE CASE, this Office holds that the grant of housing units to your employees within 50 meters from the place of your business premises shall not be considered as compensation income subject to withholding tax and to the fringe benefit tax prescribed in Section 33 of the Tax Code of 1997. ASTcEa 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. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group