Request for Exemption of the Monetized Unused Leave Credits of Officers and Employees from Withholding Tax

May 25, 1992 BIR RULING NO. 158-92 21(c) 103-92 158-92 Producers Bank Of The Philippines 8737 Paseo de Roxas Makati, Metro Manila Attention: Ms . Aida G . Sion Senior Manager Gentlemen : This refers to your letter dated February 28, 1991 requesting exemption of the monetized unused leave credits of your officers and employees from the withholding tax. It is represented that your existing policy is to grant annual vacation leaves for rest and recreation to your employees; that all regular officers and employees are entitled to 15 working days vacation leave with pay; and that if unable to avail of such leave, he/she is allowed to convert the unused leave credits in excess of 15 days to cash. In reply, please be informed that based on the foregoing facts wherein vacation leave credits of your employees who are unable to go on leave are monetized, you in effect has provided facility or privilege as a means of promoting the health, goodwill and contentment of your employees as contemplated under Section 2 of Revenue Regulations No. 12-86. Such being the case, the monetized unused vacation leave credits of your employees do not constitute additional compensation to them and, are therefore, exempt from the withholding tax provided that the same shall not exceed ten (10) days during the year. (BIR Ruling No. 029-92). adc Very truly yours, JOSE U. ONG Commissioner of Internal Revenue