PERA is Considered Remuneration/Compensation for Services Performed by the Employees for the Employer, hence Subject to Withholding Tax

July 15, 1991 BIR RULING NO. 132-91 21 (a) 71 000-00 132-91 M a d a m : This refers to your letter dated July 9, 1991 requesting clarification on whether you shall stop deducting the withholding tax from the Personnel Economic Relief Allowance (PERA) and refund to BIR employees the withholding tax already deducted therefrom, in view of the Opinion of the Secretary of Justice to the effect that PERA is not subject to income tax and therefore exempt from withholding tax prescribed under Section 21 (a) in relation to Section 72 of the Tax Code as amended. In reply, please be informed that PERA granted to all employees of the national government, local government units including government-owned or controlled corporations, is considered remuneration/compensation for services performed by the employees 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. PERA is different from representation and transportation allowance (RATA) granted under Section 34 of the General Appropriations Act to certain officials and employees of the government from the rank of Department Secretaries down to Division Chiefs in the sense that RATA is in fact a reimbursement for the expenses incurred in the performance of one's duties rather than as an additional compensation and therefore is not subject to withholding tax under Section 2 (2) (c) of Revenue Regulations No. 12-86 as amended. However, although the amount of RATA is not subject to withholding tax the excess of RATA, if not returned to the employer, constitutes taxable income which should be declared in the recipients income tax return for the year in which the RATA was received by him. (BIR Ruling No. 21 (a) 000-00-062-91) Such being the case, the withholding of tax from the PERA received by the BIR employees is proper and therefore not refundable. aisadc Very truly yours, (SGD.) JOSE U. ONG Commissioner