Reward Not Subject to Withholding Tax

June 22, 1979 BIR RULING NO. 050-79 Reward not subject to withholding tax This refers to your letter dated September 25, 1978 requesting a ruling on whether the cash required paid by your Office to "any person, except an official or employee of the System, who voluntarily gives definite information leading to the discovery of an illegal water and/or sewer connect on", is covered by the withholding tax provisions of Revenue Regulations No. 13-78 implementing Presidential Decree No. 1351 which amends Section 30 and 53 of the Tax Code. In reply, I have the honor to inform you that such reward is not subject to the withholding tax prescribed by Revenue Regulations No. 13-78 because Section 1(f) thereof which imposes a withholding tax of 15% (now, 10% beginning July 1, 1979 by virtues of Revenue Regulations No. 6-79 supplementing Revenue Regulations No. 13-78) on awards and prizes in the amount of, or the cash value of which exceeds five hundred pesos (P500.00) (now, P3,000.00 beginning July 1, 1979 by virtue of Revenue Regulations No. 6-79 supplementing Revenue Regulations No. 13-78) does not cover rewards. Awards and rewards are two different things. A reward has been defined as a recompense or a premium offered by the government or an individual in return for the performance of special or extra-ordinary services. (Zwolanok vs. Baker Mfg. Co. 150 Wis 517, 137 NW 769). It is a sum of money or other compensation offered to the public generally, or to a particular person or class of persons, or to any or call persons complying with the terms of the offer, for the performance of a designated service, as for the finding of lost property, or for forbearing to do some act. (Desclondes vs. Wilson 5 La 397). The amount allowed by statute to sheriff or other officer furnishing evidence to support conviction for distilling prohibited liquors is a "reward". (Mosely v. Kennedy, 17 So. 2d 356, 537, 245. Ala. 448). On the other hand, an award is something that is conferred or bestowed upon a person. (Webster's Third New International Dictionary). It also refers to a judgment pronounced by the arbitrators, and to make an award is to announce and publish the judgment, and while sometimes said to partake of the attributes of a contract, the weight of authority is what it is not in itself a contract in the strict sense, but is more nearly akin to judgment of a regular judicial tribunal and is no more a contract than such judgment, being at the same time of a higher nature than a mere specialty. (5 Corpus Juris 12). Payment made to taxpayer who caught tagged fish in fishing contest was "prize" or "award" within statute to effect that gross income includes amount received as prizes and awards, and catching of fish was not "civic achievement" within provision excepting from gross income amounts received primarily in recognition of civic achievement. (Simmons v. US. D. D. Md., 197 F. Supp. 673, 674). aisa dc Moreover, while the aforementioned cash rewards are not subject to the withholding tax provisions of Revenue Regulations No. 13-78 the amounts so received from that government corporation should nevertheless be declared as part of the taxable income of the recipients thereof during the year of receipt.