Subsistence/Laundry Allowances Not Compensation Income; hence, Exempt from Withholding Tax

March 12, 1993 BIR RULING NO. 101-93 SUBSISTENCE/LAUNDRY ALLOWANCES NOT COMPENSATION INCOME; HENCE, EXEMPT FROM WITHHOLDING TAX 28 263-91 101-93 National Kidney Institute East Avenue Quezon City Attention: Ms . Ma . Gilda N . Resurreccion Deputy Executive Director Administrative Services This refers to your letter dated January 5, 1993 requesting for our legal opinion on whether the following benefits granted to your employees are not considered compensation income subject to withholding tax, viz: aisadc 1. Subsistence allowance of three (3) meals in the amount of P30.00 per day; 2. Laundry allowance in the amount of P50.00 per month; and 3. Hazard allowance equivalent to 25% of the monthly basic salary of employees receiving salary grade 19 and below and 5% for those with salary grade 20 and above. It is represented that the National Kidney Institute is a specialty hospital which is government-owned and controlled and attached to the Department of Health; that by virtue of R.A. No. 7305, known as the "Magna Carta of Public Health Workers", it granted the above-mentioned allowance to its employees to promote their health, goodwill, contentment and efficiency which is emphasized in the primary objectives of the said R.A. No. 7305, i.e., to promote and improve the social and economic well-being of the health workers, their living and working conditions and terms of employment and to encourage those with proper qualification and excellent abilities to join and remain in the government service. In reply, please be informed that pursuant to Section 2(a) of Revenue Regulations No. 6-82, as amended by Revenue Regulations No. 12-86 implementing Section 28 of the Tax Code, as amended by Executive Order No. 37, "facilities or privileges" 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. Such being the case, the subsistence allowance of three (3) meals in the amount of P30.00 per day and the laundry allowance in the amount of P50.00 per month need not be included as compensation subject to withholding tax since they are give to promote the health, goodwill, contentment and efficiency of your employees and they are of "relatively small value." However, your hazard allowance equivalent to 25% of the monthly basic salary of your employees receiving salary grade 19 and below, and 5% for those with salary grade 20 and above is considered compensation income subject to withholding tax because it does not fall within the meaning of the term "facilities or privileges" as defined under Section 2(a) of Revenue Regulations No. 6-82, as amended by Revenue Regulations No. 12-86. cdta JOSE U. ONG Commissioner of Internal Revenue