Exemption from Withholding Tax on Compensation of Pag-Ibig 2 and GSIS Optional Insurance, Educational Plan and Memorial Plan Premiums

January 12, 1999 BIR RULING NO. 002-99 32 (B) (7) (l)-000-00-002-99 House of Representatives Quezon City, Metro Manila Attention: Mr . Reynaldo R . Gregorio OIC , Accounting Division Gentlemen : This refers to your letter dated December 16, 1998, requesting for a ruling as to whether or not Pag-Ibig 2, GSIS Optional Insurance Premium, GSIS Educational Plan Premium and GSIS Memorial Plan Premium are exempt from withholding tax on compensation. In reply, please be informed that Sec. 2.78(B)(12) of Revenue Regulations No. 2-98 explicitly exempts from withholding tax GSIS, SSS, Medicare, Pag-Ibig contributions and union dues of employees. Since the law and implementing regulations do not categorically state that the exemption covers only the regular GSIS and Pag-Ibig contributions, it is safe to conclude that GSIS optional and Pag-Ibig 2 contributions are likewise excludible from the gross income of the taxpayer and hence, exempt from income tax. This is so, because the provisions of law in question did not make any distinction between regular GSIS insurance and optional GSIS insurance as well as Pag-Ibig and Pag-Ibig 2 contributions. Well-settled is the rule that when the law does not distinguish, we should not distinguish. With regard however, to GSIS Educational Plan Premium and GSIS Memorial Plan Premium, the same shall be considered as part of the employee's compensation subject to withholding tax. It is emphasized herein that under Section 34 (M) of the Tax Code of 1997, only premium payments in health and/or hospitalization insurance not exceeding P2,400 per family or P200.00 a month paid during the taxable year by the taxpayer for himself, including his family, is allowed as deduction from the gross income. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue