Whether the Amount of P2,000.00 Which was Granted to Each of Your Employees during PPA's 20th Anniversary Celebration is Exempt from Withholding Tax

February 14, 1995 BIR RULING NO. 024-95 28 (b) 000-00 024-95 Pangasiwaan ng Daungan ng Pilipinas (Philippine Ports Authority) Marsman Bldg., South Harbor Port Area, Manila Attention: Mr . Teodulo T . Paderes Controller Gentlemen : This refers to your faxed letter dated July 1, 1994 requesting for a ruling on whether the amount of P2,000.00 which was granted to each of your employees during your office's 20th Anniversary Celebration is exempt from withholding tax. It is contended that "the amount granted is relatively small and was given by PPA primarily to promote goodwill, contentment/efficiency to its employees. In reply, please be informed that pursuant to Section 28(b) of the Tax Code, as amended by R.A. No. 7833, the 13th month pay and other benefits in the aggregate amount not exceeding P30,000.00 received by officials and employees of the National Government, Local Government units and agencies, including government-owned and controlled corporations, as well as by officials and employees of private corporations and entities paid or accrued beginning January 1, 1994 are exempt from income tax, and consequently from 'the withholding tax on wages. The term "13th month pay" shall refer to the mandatory one month basic salary of an official or employee of the National Government, Local Government units, agencies and instrumentalities, including government-owned and controlled corporation and of private offices received after the 12th month pay while the term "other benefits" shall refer to all benefits other than the 13th month pay, such as, the annual Christmas bonus given by the private offices, 14th month pay, mid-year productivity incentive bonus, gifts in cash or in kind and other similar benefits received by an official or employee for one calendar year in an amount not exceeding Twelve Thousand Pesos (P12,000.00) as maximum limit. Accordingly, the amount of P2,000.00 granted to each of your employees during your 20th Anniversary Celebration may be considered as falling within the contemplation of "other benefits" provided for under Section 28(b) (8) (G) of the Tax Code, as amended, and, therefore, need not form part of your employers' 1994 taxable compensation income subject to the withholding tax on wages under Revenue Regulations No. 6-82, as recently amended by Revenue Regulations No. 4-93, implementing R.A. No. 7497, amending Section 72 of the Tax Code, as amended, provided, however, that such "other benefits", inclusive of the amount of P2,000.00, shall not, in the aggregate exceed P12,000.00; and that when added to the 13th month pay, the total amount of tax exempt benefits shall not exceed P30,000.00. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue