Rice Allowance - Tax Exempt

January 15, 1993 BIR RULING NO. 029-93 RICE ALLOWANCE TAX EXEMPT 28 278-92 029-93 Leyte V Electric Cooperative, Inc. Brgy. San Pablo, Ormoc City Attention: Mr . Alejandro G . Canonio, Jr . Office Manager This refers to your letter dated May 7, 1992 requesting confirmation of your opinion that monthly rice allowance given to your employees are not subject to income tax and consequently to withholding tax. cdtech It is represented that in 1988 the employee of Leyte V Electric Cooperative, Inc. received a monthly rice allowance of P330.00; P330.00 per month in 1989, and P350.00 per month for the period from January 1990 to August 1991 and P500.00 a month from September 1991 to the present. In reply, please be informed that facilities or privileges (such as entertainment, medical services, or so called courtesy discounts on purchases) 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 merely as a means of promoting the health, goodwill, contentment, or efficiency of his employees 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. Such being the case, and since the present value of one sack of rice is not less than P500.00, the rice allowance of P500.00 per month is not considered compensation income/wages provided it is the equivalent of one sack of rice at the prevailing/present price. Accordingly, it is not subject to the withholding tax prescribed by Section 72 in relation to Section 21(a) of the Tax Code as implemented by Revenue Regulations No. 6-82 as amended, since the same is of relatively small value and offered by the employer to promote goodwill, contentment, and efficiency of its employees. aisadc JOSE U. ONG Commissioner of Internal Revenue