Inclusion of the PERA, 13th Month Pay and Cash Gift in the Taxable Income of Government Employee

May 25, 1992 BIR RULING NO. 160-92 21 (a) 155-89 62-91 160-92 Mr. Alipio J. Caballero Barangay Sta. Rita Oton, Iloilo S i r : This refers to your letter dated February 26, 1992 requesting information as to whether government workers receiving less than P9,000.00 a month salary will include Personnel Economic Relief Allowance (PERA), the 13th month pay and cash gift in their 1991 income tax return. In reply, please be informed that Memorandum Circular No. 145 of President Corazon C. Aquino dated January 17, 1992 adopted the Opinion dated July 3, 1991 of the Secretary of Justice to the effect that the PERA, like the Representation and Transportation Allowance (RATA) is not taxable and is, therefore, not subject to the mandatory withholding tax. However, since for the taxable year 1991, the PERA has been subjected to the withholding tax and the same was remitted to the BIR, PERA should therefore be declared as income for 1991 and the tax withheld therefrom could be tax credited in the income tax return to be filed on or before April 15, 1992. The individual recipient-employees may file a written request for refund of the tax withheld on PERA for 1991 with the BIR, Attn.: Appellate Division, within two (2) years after payment/remittance of the tax pursuant to Section 204 of the Tax Code. (RMC No. 15-92 dated March 11, 1992) With regard to the 13th month pay and cash gift, this Office has consistently ruled that the year-end benefits are considered compensation which shall be reported and declared by the employee in the income tax return to be filed for the year in which received. In view of the foregoing, the PERA, the 13th month pay and cash gift must be included as part of the taxable income of the concerned government employee and declared in his income tax return for the year 1991 even if his monthly salary is less than P9,000.00. atdc Very truly yours, JOSE U. ONG Commissioner of Internal Revenue