Withholding of Tax for Income Paid to Members and Staff of Fact-Finding Board Created under P.D. No. 1886

April 3, 1984 BIR RULING NO. 066-84 28-b-000-00-066-84 Gentlemen : This refers to your letter dated March 12, 1984 in effect requesting for a ruling on whether any tax has to be withheld by the Board from income payments to its members and staff. It is represented that the Fact-Finding Board created under P.D. No. 1886, as amended By P.D. No. 1903, has by resolution approved the allocation of monthly discretionary amounts to its members, P10,500.00 for the chairperson, and P20,500.00 for each of the other four members; that it has likewise allocated to the staff positions in the concept of monthly personal expenses, amounts listed in Annex "A" of your said letter, ranging from P500.00 to P12,000.00; that under the aforesaid decree, the position of the five members are honorary but they are entitled to monthly transportation allowance of at least P3,000.00 for the chairperson and P2,000.00 each for the four members. In reply, I have the honor to inform you that Section 21 of the Tax Code, as amended, provides that a tax is hereby imposed upon the taxable income received during each taxable year, from all sources, by every individual, whether a citizen of the Philippines or alien residing in the Philippines. Moreover, the term "gross compensation income" includes all income payments received as a result of an employer-employee relationship, such as salaries, wages, honoraria, bonus, pensions, allowances for transportation, representation, entertainment fees and other income of similar nature including compensation paid in kind. (Sec. 28(b) NIRC, as amended by B.P. Blg. 135) For purposes of withholding, the term "compensation" means all remunerations for service performed by an employee for his employer unless specifically excepted under Sections 28, 29 and 30 of the Tax Code. Fixed or variable transportation, representation and other allowances which are received by a public officer or employee is compensation subject to withholding. Amounts paid specifically either as advance or reimbursement for transportation, representation and other bonafide ordinary and necessary expenses incurred or reasonably expected to be incurred by the employee in the performance of his duties are not compensation subject to withholding, if the following conditions are satisfied: "1) It is for ordinary and necessary travelling and representation or entertainment expenses paid or incurred by the employee in the pursuit of the trade or business of the employer. "2) The employee is required to, and does, make an accounting/liquidation for such expense in accordance with the specific requirements of substantiation for each category of expense. If the reimbursements or advances exceed the actual expenses, the excess if not returned to the employer constitutes taxable compensation. (Sec. 2, Revenue Regulations No. 6-82, as amended by Revenue Regulations No. 9-83, implementing Batas Pambansa Blg. 135) As an ad-hoc body performing quasi-judicial functions independent from the three departments of the government, the Fact-Finding Board is considered as the employer, constituted as the withholding agent. Its chairman, the members as well as the persons appointed by the Board to the staff positions to assist it in the discharge of its functions are considered as employees of the Fact-Finding Board. Such being the case, in line with the foregoing provisions of the law and regulations, amounts paid by the Board to the persons appointed to the staff positions are deemed compensation or remunerations for services rendered subject to withholding tax, prescribed by Section 91 in relation to Section 21(a) of the Tax Code, as amended by Batas Pambansa Blg. 135 and as implemented by Revenue Regulations No. 6-82 as supplemented by Revenue Regulations No. 9-83. However, with respect to the transportation allowance of the chairman and the four members if they are granted either as advances or reimbursements, and with respect to the monthly discretionary amounts of the chairman and the members, if they are bonafide ordinary and necessary expenses incurred or reasonably expected to be incurred by them in the performance of their duties, the said amounts are not compensation subject to withholding provided that the above conditions are satisfied. If the reimbursements or advances and the discretionary amounts exceed the actual expenses, the excess if not returned to the Board constitutes taxable compensation. Very truly yours, (SGD.) TOMAS C. TOLEDO Acting Commissioner