Income Tax on COLA, Bonuses and RATA Due to Local Government Officials and Employees

February 1, 1990 BIR RULING NO. 013-90 21 (a) 263-89 013-90 Gentlemen : This refers to the various resolutions from the local government units requesting for a ruling that the Cost of Living Allowance (COLA), Bonuses, and Representation and Transportation Allowances (RATA) due to local government officials and employees entitled thereto, are tax exempt, viz: cdtech 1. Res. No. 33 of the Sangguniang Panlalawigan of Sorsogon; 2. Res. No. 110-89 of the Sangguniang Panlungsod of Tacloban City; 3. Res. No. 216-89 of the Sangguniang Panlalawigan of Camarines Norte; 4. Res. No. 229-89 of the Sangguniang Panlalawigan of Agusan Del Norte; 5. Res. No. 76-89 of the Sangguniang Panlalawigan of Misamis Oriental; 6. Res. No. 587-89 of the Sangguniang Panlalawigan of Davao del Norte; 7. Res. No. 162-89 of the Sangguniang Panlalawigan of Siquijor; 8. Res. No. 100-89 of the Sangguniang Panlalawigan ng Iloilo; 9. Res. No. 373-89 of the Sangguniang Panlalawigan of Nueva Ecija; 10. Res. No. 195-89 of the Sangguniang Panlalawigan of Cotabato. 11. Res. No. 116-89 of the Sangguniang Panlalawigan of Negros Oriental; 12. Res. No. 618-89 of the Sangguniang Panlalawigan of Benguet; 13. Res. No. 322-89 of the Sangguniang Panlalawigan of Southern Leyte; 14. Res. No. 41-89 of the Sangguniang Panlalawigan of Capiz; 15. Res. No. 183 of the Sangguniang Panlungsod of Pagadian City; 16. Res. No. 149-89 of the Sangguniang Panlungsod of Butuan City; 17. Res. No. 103-89 of the Sangguniang Panlungsod of San Pablo City; 18. Res. No. 148-89 of the Sangguniang Panlungsod of Baguio City; 19. Res. No. 231-89 of the Sangguniang Panlungsod of Gingoog City; 20. Res. No. 98-89 of the Sangguniang Panlungsod of Tagbilaran City; 21. Res. No. 436-89 of the Sangguniang Panlungsod of Puerto Princesa; 22. Res. No. 852-89 of the Sangguniang Panlungsod of Cotabato City; 23. Res. No. 175-89 of the Sangguniang Panlungsod of Cotabato City; 24. Res. No. 180-89 of the Sangguniang Panlungsod of Pagadian City. In reply, please be informed that the request of the various local government units for tax exemption of the COLA, Bonuses and Representation and Transportation Allowance (RATA) of local government officials and employees cannot be granted for lack of legal basis. It is a cardinal rule in taxation that exemptions from payment thereof are highly disfavored in law, and the party claiming exemption must justify his claim by a clear, positive, or express grant of such privilege by law. An exemption from the common burden cannot be permitted to exist upon vague implication. (Collector of Internal Revenue vs. Manila Jockey Club, Inc., 98 Phil. 670; House vs. Posadas, 53 Phil. 338; Asiatic Petroleum Co. vs. Llanes, 49 Phil. 466 cited in Phil. Bank of Communications vs. Commissioner of Internal Revenue, C.T.A. Case No. 2725, January 6, 1988). In other words, an exemption from the payment of taxes cannot be claimed unless it is expressly provided for in/by the law. The burden of proof is always upon him who claims a tax exemption in his favor to point out to some provisions of law granting the exemption and to bring himself within the terms of that exempting provision. In this case, however, there is no statutory provision pointed out which explicitly grants such tax exemption. Taxable compensation, business and other income received during each taxable year from all sources by every individual, whether a citizen of the Philippines or alien residing in the Philippines shall be subject to income tax at the rates prescribed under Section 21(a) in relation to Section 28 of the Tax Code, as amended. For purposes of withholding, the term compensation income means all remunerations for services performed by an employee for his employer unless specifically excepted under Sections 27, 28(b) and 71 of the Tax Code, as amended. Compensation income includes all income payments received as a result of an employer-employee relationship, such as salaries, wages, honoraria, bonus , taxable pensions, allowances , fringe benefits, and other of similar nature. (Revenue Regulations No. 6-82 as amended by Rev. Regulations No. 12-86). In view thereof, and being a part of the remuneration or compensation paid to local government employees throughout the country for services rendered, the aforementioned Cost of Living Allowance (RATA) are subject to income tax and consequently, to the withholding tax on wages prescribed by Section 72 in relation to Section 21(a), Chapter X, Title II of the Tax Code as amended, and implemented by Revenue Regulations No. 6-82 as amended. Very truly yours, (SGD.) JOSE U. ONG Commissioner