Request for Reconsideration of Assessment No. 007-1290-014604 Representing Deficiency Income Tax and RATA Increments

April 2, 1992 BIR RULING NO. 116-92 21 (a) 271-91 116-92 Mr. Dominador M. Cruz Department of Labor and Employment National Labor Relations Commission Manila S i r : This refers to your letter dated October 25, 1991 requesting for reconsideration of Assessment No. 007-1290-014604 involving the amount of P12,584.16 as income tax plus surcharge, interest and compromise on your Representation and Transportation Allowance (RATA) for calendar year 1990. In reply, please be informed that this Office has consistently ruled that RATA granted under Section 34 of the General Appropriations Act, to government officials from the rank of Department Secretaries down to Division Chiefs, and those of equivalent rank as may be determined by the Department of Budget and Management are in fact reimbursement for the expenses incurred in the performance of one's duties rather than as an additional compensation subject to withholding tax, (Section 2(2)(c) Revenue Regulations No. 12-86) but the excess of RATA, if not returned to the employer constitutes taxable income of the recipient for the year in which RATA was received. (BIR, Ruling No. 062-91). However, the ruling cited above was issued after the Secretary of Budget and Management confirmed in a letter dated March 8, 1991 that "RATA is in fact a reimbursement for the expenses incurred in the performance of one's duties rather than as an additional compensation . . . subject to withholding"; hence cannot be given retroactive application. Accordingly, this Office issued Revenue Memorandum Circular No. 60-91 dated July 9, 1991 providing that the aforecited ruling shall be applicable beginning taxable year 1991. Any amount of tax withheld from RATA shall not be refunded, but shall be credited against the income tax due of the officials and employees concerned when the annualized withholding tax is determined as of the year end 1991. In view thereof, your request for reconsideration of Assessment No. 007-1290-014604 involving the amount of P12,584.16 representing deficiency income tax plus increments on your RATA of the year 1990 issued against you, by the Office of the Regional Director, Revenue Region No. 1, Baguio City has to be, as it is, hereby denied for lack of legal basis. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue