Leave Credits Not Exceeding 10 Days During the Year Not Subject to Income Tax and Consequently to Withholding Tax

February 20, 1996 BIR RULING NO. 016-96 21 (a) 72 000-00 016-96 China Banking Corporation Paseo de Roxas cor. Villar St. Makati City, Metro Manila Attention: Mr . R . P . Del Rosario Jr . Manager Human Resource Management and Development Division Gentlemen : This refers to your letter dated October 10, 1995, stating that under that company's existing policies, employees are entitled to 15 days vacation leave yearly: and that unused vacation leave credits are accumulated up to 45 days and may be commuted to cash (maximum of 45 days) upon the resignation/separation of employees. cd Based on the foregoing, you are requesting clarification as to the applicability of BIR Ruling No. 099-92 dated March 20, 1992 in cases where the leave credits convertible to cash are more than 10 days, e.g., 20 days. In reply, please be informed that the adverted ruling specifically states that leave credits not exceeding 10 days during the year are not subject to income tax and consequently to withholding tax. Hence, if the monetized leave credits exceed 10 days, the excess thereof will be subject to income tax and consequently to withholding tax. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue