Additional Exemption of Taxpayer with More than (4) Dependents

February 28, 1990 BIR RULING NO. 023-90 100 (a) & 149 330-88 023-90 Gentlemen : This refers to your letter dated August 19, 1989 requesting a ruling on whether a taxpayer with more than four dependents is qualified for an additional exemption of P1,000.00 for each dependent in excess of four, assuming that the youngest was born on January 4, 1974. Likewise, you request confirmation of your opinion that the counting of four dependents starts from the eldest. You pointed out that in the guidelines at the back of BIR Form 1701-A, a pertinent portion states: "children in excess of four who were born before January 1, 1973 and qualified as dependents prior to January 1, 1980, shall continue to be entitled to the additional exemption of P1,000.00 each." On the other hand, in the National Internal Revenue Code of the Philippines, Annotated, 1989 by Jose N. Nolledo and Mercedita S. Nolledo, it is indicated on page 211 that "an additional exemption of P1,000.00 is given for each child in excess of four who qualified as dependent prior to January 1, 1980 (therefore, born before January 1, 1980)." In reply, please be informed that Section 29(I)(2)(A) of the National Internal Revenue Code, as amended, provides: "(A) Taxpayers with dependents A married individual or a head of family shall be allowed an additional exemption of Three Thousand Pesos (P3,000.00) for each dependents: Provided, that the total number of dependents for which additional exemptions may be claimed shall not exceed four dependents: Provided, further , that an additional exemption of One Thousand Pesos (P1,000.00) shall be allowed for each child who otherwise qualified as dependent prior to January 1, 1980; . . . ." The same provision states that a dependent is not more than twenty-one (21) years of age. Presidential Decree No. 69 which took effect on January 1, 1973, limited the additional exemption (then still P1,000.00 for each dependent) to only four qualified dependents. However, taxpayers who had claimed additional exemption for more than four dependents prior to January 1, 1973 were allowed to continue claiming additional exemption for such dependents for the year 1973 and subsequent years, provided such dependents were not over twenty-one years old at the end of the said calendar years. But in the case of any child born within the calendar year 1973, if the qualified dependents before said year exceeded four at the end of the year 1973, the taxpayer cannot claim an additional exemption for the child born in said year. The same rule applies to subsequent calendar years. Therefore, unless and until the number of dependents previously considered for purposes of additional exemption shall have been reduced to less than four, the taxpayer cannot claim additional exemption for the child born in year 1973, or subsequent years. Presidential Decree No. 1773 increased the amount of additional exemption to P2,000.00 for each qualified dependent with the proviso that "the additional exemption of One Thousand Pesos (P1,000.00) shall be allowed for each child who otherwise qualified as dependent prior to January 1, 1980", effective January 1, 1980. Such being the case, those already enjoying exemptions for more than four dependents prior to January 1, 1980 may continue to claim the same until the number is reduced to four. In sum, the Tax Code grants additional exemption of P3,000.00 (pursuant to E.O. No. 999 effective January 19, 1985) for each qualified dependent not exceeding four, and P1,000.00 for each dependent in excess of four who otherwise qualified as dependent prior to January 1, 1980 under the provisions of PD No. 1773, meaning children who were born prior to January 1, 1973. A priori, a taxpayer with more than four dependents can avail of the additional exemption of P1,000.00 for each dependent in excess of four born prior to January 1, 1973 and qualified as such, at the end of the calendar year under consideration. Assuming that the youngest of more than four qualified dependents was born on January 4, 1974, then he is no longer qualified for the additional exemption of P1,000.00 From the provision indicating that an additional exemption of P1,000.00 is allowed for each dependent in excess of four who qualified as such prior to January 1, 1980, it can be inferred that the counting of four dependents starts from the eldest. Hence, your opinion that the counting of four dependents starts from the eldest is hereby confirmed. cdta Very truly yours, (SGD.) JOSE U. ONG Commissioner