Loyalty Award/Cash Bonus Subject to Income Tax

April 28, 1993 BIR RULING NO. 147-93 LOYALTY AWARD/CASH BONUS SUBJECT TO INCOME TAX 2 (b) (7) (B) 50-93 147-93 Philippine Fisheries Development Authority 7th Floor, Union Square I Building No. 145, 15th Avenue, Cubao Quezon City Attention: Mr . Jose M . Abarquez Manager Reference is made to your letter of November 5, 1992 which was referred to this Office by the Civil Service Commission for reply to your query as to whether the grant of loyalty award to deserving government officials and employees in the form of cash bonus is subject to tax. In reply, please be informed that pursuant to Section 2 of Revenue Regulations No. 6-82, as amended by Revenue Regulations No. 12-86 the term "compensation" means all remunerations for services performed by an employee for his employer, unless specifically excepted under Sections 28 and 71 of the Tax Code, as amended. The name by which the remunerations for services is designated is immaterial. Thus salaries, wages, emoluments and honoraria, bonuses, allowances, fringe benefits, fees, including director's fees, taxable pensions and retirement play and other income of similar nature constitute compensation income. Such being the case, the loyalty award in the form of cash bonus is considered compensation subject to income tax under Section 21(a) of the Tax Code, and consequently to the withholding tax on wages prescribed by Section 72, Chapter X, Title II of the same Code, as amended. aisadc VICTOR A. DEOFERIO, JR. Deputy Commissioner of Internal Revenue