Medical Cash Allowance of P750.00 per semester Need Not be Included as Compensation Subject to Withholding Tax

January 20, 1992 BIR RULING NO. 030-92 28 095-91 030-92 Bangko Sentral ng Pilipinas Manila Attention: Mr . Sebastian V . Palanca, Jr . Managing Director Gentlemen : This refers to your letter dated July 11, 1990 stating that the Bangko Sentral ng Pilipinas grants a medical cash allowance for the dependents of its employees which is an integral part of the CB Hospitalization, Medical and Dental Benefits Plan; that the original practice was for employees to advance payment for doctors' fees and purchase of medicines for their dependents subject to a reimbursement scheme; and that the practice was found to be cumbersome, hence, to streamline the procedure, employees were merely given a cash advance of P750.00 per semester of P125.00 per month to cover the medical expenses of their dependents. Based on the foregoing, you request for a ruling that the said allowance be excluded from gross compensation income. In reply, please be informed that pursuant to Section 2(a) of Revenue Regulations No. 6-82 as amended by Rev. Reg. No. 12-86 implementing Section 28 of the Tax Code, as amended by Executive Order No. 37, " 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 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." (emphasis supplied) Such being the case, the allowance of P750.00 per semester or P125.00 per month need not be included as compensation subject to withholding tax since the same is of relatively small value and offered by the employer to promote goodwill, contentment, and efficiency of its employees (Rev. Reg. 6-82 as amended by Rev. Reg. 12-86). cdta Very truly yours, (SGD.) JOSE U. ONG Commissioner of Internal Revenue