Whether Representation Allowance and Transportation Allowance (RATA) Granted to Officers and Employees of the Philippine Ports Authority (PPA) shall be Treated as Part of the Gross Compensation Income and Thus Subject to Withholding Tax

February 14, 1991 BIR RULING NO. 021-91 21 (a) 217-90 021-91 Gentlemen : This refers to your letter dated March 12, 1990 requesting a ruling as to whether Representation Allowance and Transportation Allowance (RATA) granted to officers and employees of the Philippine Ports Authority (PPA) shall be treated as part of the gross compensation income and thus subject to withholding tax. cdta You represented that RATA is granted to PPA officers and employees as a reimbursable expense at a maximum of 40% of basic pay for managerial level and at a maximum of 20% of basic pay for supervisory level. In reply, please be informed that the term "gross compensation income" includes all income payments received as a result of an employer-employee relationship, such as salaries and wages, honoraria, bonus, pensions, allowances for transportation, representation, entertainment fees and other income of similar nature including compensation paid in kind. For purposes of withholding tax, the term "compensation" 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. Fixed or variable transportation, representation and other allowances which are received by a public officer or employee is compensation subject to withholding. Amounts paid specifically either as advances or reimbursements for transportation, representation and other bonafide ordinary and necessary expenses incurred or reasonably expected to be incurred by the employee in the performance of his duties are not compensation subject to withholding tax, if the following conditions are satisfied, to wit: 1) It is for ordinary and necessary travelling and representation or entertainment expenses paid or incurred by the employee in the pursuit of the trade or business of the employer. 2) The employee is required to, and does, make an accounting/liquidation for such expense in accordance with the specific requirements of substantiation for each category of expense. If the reimbursements or advances exceed the actual expenses, the excess if not returned to the employer constitutes taxable compensation (Sec. 2 Revenue Regulations No. 6-82 as amended by Rev. Reg. No. 9-83, implementing Batas Pambansa Blg. 135). cdti Very truly yours, (SGD.) JOSE U. ONG Commissioner