Request that the Representation and Transportation Allowances of Government and Non-Government Officials and Employees be Excluded from the Computation of Their Gross Income or Otherwise be Exempt from Income Tax

February 14, 1991 BIR RULING NO. 024-91 21 (a) 013-90 024-91 Gentlemen : This refers to Resolution No. 696, current series, of the Sangguniang Panlungsod, Puerto Princesa City which your Office forwarded to us on September 27, 1990, requesting that the representation and transportation allowances of government and non-government officials and employees be excluded from the computation of their gross income or otherwise be exempt from income tax. In reply, please be informed that the above request cannot be granted for lack of legal basis. 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 the withholding tax 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, fees and other income of similar nature (Revenue Regulations No. 6-82 as amended by Revenue Regulations No. 12-86). In view thereof, and being part of the remuneration or compensation paid to government and non-government officials and employees, the aforementioned representation and transportation allowances of local government officials and employees are subject to income tax under Section 21(a) of the Tax Code; and, consequently, to the withholding tax on wages prescribed by Section 72, Chapter X, Title II of the same Code as amended, and implemented by Revenue Regulations No. 6-82, as amended. Very truly yours, (SGD.) JOSE U. ONG Commissioner