BIR Ruling No. 085-13

March 5, 2013 BIR RULING NO. 085-13 RR 2-98; BIR Ruling No. 003-08 National Transmission Corporation Power Center, Quezon Avenue corner BIR Road Diliman, Quezon City Attention: Rolando T. Bayani President and CEO Gentlemen : This refers to your letter dated November 14, 2012 requesting for clarification on the Special Counsel Allowance (SCA) granted to government lawyers. Section 42 of the Republic Act No. 10155 or the General Appropriations Act for Fiscal Year 2012 provides that: "Sec. 42. Special Counsel Allowance . Lawyer-personnel, including those designated to assume the duties of a legal officer and those in the legal staff of departments, bureaus, offices or agencies of the National Government deputized by the Office of the Solicitor General to appear in court as special counsel in collaboration with the Solicitor General or prosecutors concerned, are hereby authorized an allowance of One Thousand Pesos (P1,000) for each appearance or attendance of hearing except pursuant to a motion for extension, chargeable to savings in the appropriations of their respective offices, but not exceeding Four Thousand Pesos (P4,000) per month. PROVIDED, That the special counsel allowance shall not be granted to lawyer-personnel appearing before quasi-judicial and administrative agencies. Implementation of this section shall be subject to guidelines issued by the DBM." In reply, please be informed that, the term "compensation" means all remuneration for services performed by an employee for his employer under an employer-employee relationship, unless specifically excluded by the Tax Code of 1997. Salaries, wages, emoluments and honoraria, allowances, commissions and other income of a similar nature constitute compensation income. (Section 2.78.1 (A) of Revenue Regulations 2-98, as amended). cDTaSH In BIR Ruling No. 003-08, dated April 14, 2008, this Office had the occasion to rule that " the name by which the remuneration for services is designated is immaterial. Thus, salaries, wages, emoluments and honoraria, bonuses, allowances (such as transportation, representation, entertainment and the like),fringe benefits (monetary and non-monetary),fees, including director's fees, taxable pensions and retirement pay and other income of a similar nature constitute compensation income ." In view of the foregoing, the SCA received by government lawyers is subject to income tax and, consequently, to the withholding tax on compensation pursuant to RR No. 2-98, as amended. EHTCAa Very truly yours , (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue