Monthly Allowances Which a Philippine Youth Trainee Will Receive under the Overseas Youth Training Program Do Not Constitute Compensation Income; Hence, Not Subject to Income Tax

February 27, 1996 BIR RULING NO. 031-96 21 (a) 28 000-00 031-96 National Industrial Manpower Training Council 5th Floor, Trade and Industry Bldg. 361 Sen. Gil J. Puyat Avenue Makati City Attention: Ms . Norma L . Roque Executive Director Gentlemen : This refers to your letter dated August 3, 1995 which was referred to this Office by the Assistant Secretary, Revenue Operations Group, Department of Finance, in effect requesting that the funds to be received by the trainees under the Overseas Youth Training Program to be provided by Taipei, be exempted from income tax. It appears that the Taipei Economic and Cultural Office (TECO) and the Manila Economic and Cultural Office (MECO) have prepared a Cooperation Arrangement with the aim of training eligible Philippine youths to become entrepreneurs; that the executing agency of the Program on the part of Taipei is the International Economic Cooperation Development Fund (IECDF) of the Ministry of Economic Affairs of Taipei while its counterpart in Manila will be the Department of Trade and Industry (DTI); that the training program for the benefit of eligible youth of the Philippines will be conducted in Taiwan and will consists of both on-the-job training and course study in the fields of industrial and managerial skills required of an entrepreneur; that during the trial stage of the program, up to 100 youths will be selected from the Philippines and admitted to the program; that the maximum period of the training will be two (2) years during which period the trainees must reside in Taiwan; that all costs of training will be borne by the Program Fund which will be farmed out of contributions from Participating Enterprises; that the Program Fund will be the source of the cost and expenses of the trainees' board and lodging in Taiwan, adequate medical and accident insurance; and that each trainee will receive monthly allowance of NT$4,000 during the training period jointly provided by the Program Fund and IECDF. In reply, please be informed that the aforesaid monthly allowances which a Philippine youth trainee will receive under the Overseas Youth Training Program do not constitute compensation income as contemplated under Section 28(a) of the Tax Code, as amended; hence, not subject to income tax prescribed under Section 21(a) of the same Code. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue