Cash Gifts Given to Officers and Employees Form Part of Their Compensation Income Subject to Withholding Tax

May 21, 1985 BIR RULING NO. 078-85 28 66-84 078-85 Gentlemen : This refers to your letter dated December 7, 1984 stating that in accordance with the Christmas tradition and spirit the PDIC Board of Directors granted cash gifts in amounts ranging from P500.00 to P10,000.00 to the following: (1) The Chairman and members of the Board of Directors; (2) PDIC members of the Compensation Committee, Technical and Study Groups of the Financial Institutions Sector; (3) All PDIC officers and employees; (4) Casual and contractual workers; and (5) COA personnel assigned to PDIC. You now request for opinion on whether or not said cash gifts form part of the gross compensation under Section 28(b) of the Tax Code as amended by Batas Pambansa Blg. 135 for purpose of the withholding tax. cd In reply, please be informed 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 . . . " (Section 28(b) NIRC, as amended by Batas Pambansa Blg. 135) For purposes of withholding, the term "compensation" means all remuneration for service performed by an employee for his employer unless specifically exempted under Section 28(c), 29(c) and 90(a) of the Tax Code. cdt Such being the case, cash gifts given to your officers and employees form part of their compensation income subject to withholding tax under Section 90 of the Tax Code as amended by Batas Pambansa Blg. 135. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner