Ms. Imelda Q. Mangio, et al.

December 2, 2009 BIR RULING [DA-(ECB-024) 724-09] BIR RULING DA-211-01 Ms. Imelda Q. Mangio, et al. c/o City Health Office San Fernando, Pampanga Gentlemen : This refers to your letter dated October 23, 2009 requesting for a ruling on whether the monetized value of leave credits of the Rural Health Workers in the City of San Fernando is taxable. In reply, please be informed that pursuant to Section 1 of Executive Order (EO) No. 291, abrogating Section 2.78.1 (A) (7) of Revenue Regulations (RR) No. 2-98, and other BIR Rulings which subject the monetization of vacation leave credits in excess of ten (10) days and sick leave credits to income tax, "the monetized leave credits of government officials and employees shall continue to be exempted from income tax". Under Memorandum Circular No. 31, S. 1991 implementing Joint Civil Service Commission-Department of Budget and Management, Circular No. 1, S. of 1991, as amended by Joint CSC-DBM Circular No. 2-97, S. of 1997 which is the basis of EO 291, both vacation and sick leave credits are allowed to be monetized. Section 2.78.1 of RR No. 2-98, as amended by RR No. 8-2000 and 10-2000 clarifies that the monetized (vacation or sick) leave credits of government employees are de minimis benefits not subject to income tax and withholding tax, viz. : "Sec. 2.78.1. Withholding of Income Tax on Compensation Income. (A) . . . (1) Compensation paid in kind. . . . (2) . . . (3) Facilities and privileges of relatively small value. aCITEH xxx xxx xxx The following shall be considered as 'de minimis' benefits not subject to income tax as well as withholding tax on compensation income of both managerial and rank and file employees: (a) Monetized unused vacation leave credits of private employees not exceeding ten (10) days during the year and the monetized value of leave credits paid to government officials and employees; xxx xxx xxx" In view of the foregoing, the monetized value of vacation and sick leave credits of the Rural Health Workers in the City of San Fernando is not taxable. 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. aHIDAE Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service