Taxability of Overtime Meal Allowance

May 5, 1999 BIR RULING NO. 061-99 RR 2-98 S.33-000-00-061-99 Petron Corporation 7901 Makati Avenue 1200 Makati City Attention: Mr . Wilfrido A . Galoyo Employee Relations Manager Human Resource Management Division (HRMD) Gentlemen : This refers to your letters dated August 25 and 31, 1998 requesting for a ruling on the taxability of the overtime meal allowance which is being furnished by you to your rank and file employees pursuant to their Collective Bargaining Agreement (CBA) and to your supervisory, professional and technical employees. It is represented that employees who rendered overtime work for at least two (2) hours are entitled to overtime meal allowances in the following amounts: For rank and file employees : P80.00 / P90.00 / P100.00 For supervisory, professional and technical employees : P150.00 and that the overtime meal allowances are granted to employees who actually rendered overtime work. In reply, please informed that pursuant to Section 2.78.1 (A)(2) of Revenue Regulations No. 2-98 on Withholding of Income Tax on Compensation, where a person receives a salary as remuneration for services rendered, and in addition thereto, living quarters or meals are provided, the value to such person of the quarters and meals so furnished shall be added to the remuneration paid for the purpose of determining the amount of compensation subject to withholding. However, if living quarters or meals are furnished to an employee for the convenience of the employer, the value thereof need not be included as part of compensation income. Furthermore, under Section 2.78.1 (A)(3) of Revenue Regulations No. 2-98, facilities and 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. LLpr Such being the case, the overtime meal allowances of P80.00 / P90.00 / P100.00 given by you to your rank and file employees, who have actually rendered overtime work, are not considered as part of compensation subject withholding tax since the same are of relatively small value. Likewise, the overtime meal allowance of One hundred fifty pesos (P150.00) given to your supervisor, professional and technical employees are not considered as part of compensation subject to withholding tax since such overtime meal allowance are furnished to the employees for your convenience. Moreover, the said overtime meal allowance granted to your rank and file employees and to your supervisory, professional and technical employees are not subject to the fringe benefits tax pursuant to Section 33 (C) of the Tax Code of 1997 as implemented by Section 2.33 (C) of Revenue Regulations No. 3-98, pertinent provision of which is as follows: "SEC. 2.33. Special Treatment of Fringe Benefits. "(A) . . . "(B) . . . "(C) Fringe Benefits Not Subject to Fringe Benefits Tax In general, the benefits tax shall not be imposed on the following fringe benefits: "(1) Fringe benefits which are authorized and exempted from income tax under the Code or under any special law; "(2) Contributions of the employer for the benefit of the employee to retirement, insurance and hospitalization benefit plans; "(3) Benefits given to rank and file, whether granted under a collective bargaining agreement or not ; "(4) De minimis benefits as defined in these Regulations; "(5) If the grant of fringe benefits to the employee is required by the nature of or necessary to the trade, business or profession of the employer ; or "(6) If the grant of the benefit is for the convenience of the employer ." (Emphasis supplied) In fine, the overtime meal allowance granted to the rank and file employees are not subject to the fringe benefits tax as these are specifically exempted from the application thereof. Likewise, the overtime meal allowances granted to the supervisory, professional and technical employees are not subject to the fringe benefits tax since the same are granted to the employees as required by the nature of, necessary to your trade, or business and for your convenience. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be discovered that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue