Rice Subsidy Given to Employees is Not Compensation Income Subject to Withholding Tax

June 18, 1991 BIR RULING NO. 108-91 28 028-91 108-91 Gentlemen : This refers to your letter dated March 14, 1991 stating that under a Collective Bargaining Agreement covering the period from April 1988 to April 1991, all the members of the labor union, Social Christian Democratic Workers Union At Proton Chemical received from their company a monthly rice subsidy converted into cash in the amount of P360.00. cdti Based on the foregoing, your request for a ruling on the taxability of rice subsidy converted into cash and the prospect of claiming a refund of the tax withheld from the monthly remittances of the company during the current year. In reply, please be informed that 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, provides that "facilities or 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. "Such being the case, pursuant to BIR Ruling No. 348-87 dated November 7, 1988, a monthly rice subsidy was considered a privilege of relatively small value given by the employer for the purpose of promoting the health, goodwill, contentment or efficiency of his employees, thus, the same is not compensation income subject to the withholding tax. Moreover, pursuant to BIR Ruling No. 055-89 dated April 5, 1989, even if the rice subsidy is converted into cash for administrative convenience, it is not considered as compensation income subject to withholding tax. In view thereof, this Office is of the opinion and hereby holds that the aforementioned rice subsidy is not compensation income subject to withholding tax. Anent the claim for refund, the income tax paid by the employees under the withholding provisions of the Tax Code corresponding to the rice subsidy may be refunded, provided that a claim for refund is filed within two (2) years from the date of payment, pursuant to Section 204 of the Tax Code. cdta Very truly yours, (SGD.) JOSE U. ONG Commissioner