Request for Exemption of Student-Workers from Withholding Tax

June 7, 1994 BIR RULING NO. 112-94 21 (a) 000-00 112-94 Director Virgilio V. Guillermo Bureau of Local Employment Department of Labor and Employment M a n i l a S i r : This refers to your letter dated April 5, 1993 stating that the Department of Labor and Employment is implementing for the first time this summer the "Special Program For the Employment of Students" (SPES) in accordance with Republic Act No. 7323 which is an Act to Help Poor But Deserving Students Pursue Their Education by Encouraging Their Employment During Summer and/or Christmas Vacations, Through Incentives Granted to Employers, Allowing Them to Pay Only Sixty Per Centum of Their Salaries or Wages and the Forty Per Centum Through Education Vouchers to be Paid by the Government Prohibiting and Penalizing the Filing of Fraudulent or Fictitious Claims and For Other Purposes"; and that you now request for the exemption of your student-workers from the withholding tax due to the following reasons: 1. The program is of short duration which will lasts only for this summer, and 2. It is a special program for the poor but deserving students. In reply, please be informed that the salaries or wages being paid to all the student-workers under your Special Program for the Employment of Students (SPES) are compensation for services performed by the employee-students for the employer, hence taxable income subject to the withholding tax under Section 2 (2) (a) of Revenue Regulations No. 6-82 as amended by Revenue Regulations No. 12-86 implementing Section 21(a) in relation to Section 72, Chapter 10, Title II of the Tax Code which provides thus: "2. Gross Compensation Income . (a) In general For purposes of withholding tax, the term "compensation" means all remuneration for services performed by an employee for his employer unless specifically excepted under Sections 28 and 71 of the National Internal Revenue Code." Accordingly, this Office is of the opinion as it hereby holds that the salaries or wages paid to the student-workers are subject to income tax and consequently to the withholding tax on wages at the rates prescribed by Section 21(a) of the Tax Code as implemented by Revenue Regulations No. 6-82 as amended. aisadc Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue