Request for Exemption from Income Tax and Consequently Withholding Tax on Certain Benefits Given to Hospital Employees

January 17, 1994 BIR RULING NO. 023-94 21 (a) 29-332-93-023-94 East Avenue Medical Center East Avenue, Quezon City Attention: Dr . Orlando P . Pua Chief, Medical Center Gentlemen : This refers to your letter dated September 28, 1993 requesting for exemption from income tax and consequently withholding tax on the following benefits given to employees of the hospital, namely: 1) Subsistence allowance at P6.67 per meal; 2) Laundry Allowance at P1.67 per day; 3) Clothing Allowance at P1,000.00 per year. In reply, please be informed that pursuant to Section 2(a) of Revenue Regulations No. 6-82 as amended by Revenue Regulations No. 12-86 implementing Section 28 of the Tax Code, as amended by Executive Order No. 37, facilities or privileges furnished or offered by an employer to his employees generally are not considered as compensation subject to withholding tax if such facilities or privileges are of relatively small value and are offered or furnished by the employer as a means of promoting the health, goodwill, contentment or efficiency of his employees. Such being the case, the subsistence allowance of P6.67 per meal and laundry allowance of P1.67 per day to be given to hospital employees need not be included as part of compensation subject to withholding tax, since the same is of relatively small value and offered by the government to promote goodwill, contentment and efficiency of the hospital employees. (Rev. Reg. 6-82, as amended by Rev. Reg. No. 12.86). Moreover, clothing or uniform allowance given to personnel/employees as officially prescribed is not considered income subject to withholding tax. (BIR Ruling No. 55-89). Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue