Taxability of Longevity Pay, Hazard Pay, and Cost of Living Allowance

November 8, 1996 BIR RULING NO. 120-96 R.A. 6975 000-00 120-96 Philippine National Police Headquarters Finance Service Camp Crame, Quezon City Attention: Hector R . Marcelo Police Chief Superintendent Director Gentlemen : This refers to your letter dated August 8, 1996 requesting for a ruling as to whether the following pay and allowance are not subject to tax: cd 1. Longevity pay; 2. Hazard pay; and 3. Cost of living allowance In reply, please be informed that Section 77 of Republic Act 6975, otherwise known as "An Act Establishing the Philippine National Police under a Reorganized Department of the Interior and Local Government, and for other Purposes" provides as follows: "SEC. 77. Exemption from Attachment and Taxes. All benefits granted by this Act, including benefits received from the Government Service Insurance System SHALL NOT BE SUBJECT TO attachment, levy, execution or ANY TAX OF WHATEVER NATURE." (Emphasis supplied). The benefits mentioned above include, among others, longevity pay, hazard and cost of living allowance, viz: "SEC. 71. Longevity Pay and Allowances. Uniformed personnel of the Department shall be entitled to a longevity pay of ten percent (10%) of their Basic monthly salaries for every five (5) years of service, which shall be reckoned from the date of the personnels original appointment in the AFP, or appointment in the police, fire, jail or other allied services prior to the integration of the PC and the PNP: Provided, That the totality of such longevity pay shall not exceed fifty percent (50%) of the basic pay. They shall also continue to enjoy the subsistence allowance, quarters allowance, clothing allowance, cost of living allowance , hazard pay , and all other allowances as provided by existing laws." (Emphasis supplied). In view thereof, Longevity Pay, Hazard Pay and Cost of Living Allowance received by PNP personnel nationwide as provided for in the aforequoted Section 71 in relation to Section 77 of Republic Act No. 6975 are exempt from income tax. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue