Per Diems Received by Members of the Sangguniang Bayan are Subject to Income Tax

May 25, 1989 BIR RULING NO. 111-89 72 000-00 111-89 S i r : This refers to your letter dated March 11, 1989 addressed to the Secretary of Finance which was referred to this Office for a ruling relative to your query as to whether or not the per diems of members of the Sangguniang Bayan are reportable and subject to income tax. It is represented that members of the Sangguniang Bayan do not receive any salary nor COLAs and are paid only for actual attendance. In reply, I have the honor to inform you that under Section 2 of Revenue Regulations No. 12-86 amending Revenue Regulations No. 6-82 as amended, otherwise known as the Withholding Tax Regulations on Compensation implementing Section 72 of the Tax Code, as amended, for purposes of withholding tax, the term "compensation" means all remuneration for services performed by an employee for his employer unless specifically excepted under Section 29 (now Section 28) and 90 (now 80) of the National Internal Revenue Code. 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. The basis upon which the remuneration is paid is immaterial in determining whether the remuneration constitutes compensation. Thus, it may be paid on the basis of piecework, or a percentage of profits; and may be paid hourly, daily, weekly, monthly or annually. Moreover, the term "employee" refers to any individual who is the recipient of wages and includes an officer, employee, or elected official of the Government of the Philippines or any political subdivision, agency or instrumentality thereof. (Section 71(c), Tax Code, as amended) Such being the case, and since per diem is defined to mean: 1) By or for the day or 2) An allowance (of money) for expenses each day (Webster Illustrated Contemporary Dictionary, Encyclopedia Ed., p. 538), this Office is therefore, of the opinion as it hereby holds that the per diems being received by members of the Sangguniang Bayan are subject to income tax under Title II of the Tax Code and consequently, from the withholding tax on wages prescribed under Section 72 of the same Code. cd Very truly yours, (SGD.) JOSE U. ONG Commissioner