When RATA Constitutes Taxable Income

August 30, 1991 BIR RULING NO. 167-91 21 062-91 167-91 MEMORANDUM TO: The Revenue District Officer Revenue District No. 70 Zamboanga City Reference is made to your letter dated July 3, 1991, relative to the Commission on Audit Memorandum No. 91-709 dated May 2, 1991, stating that conformably to the BIR Ruling No. 062-91 dated April 15, 1991 issued to the Executive Director, Postal Office, RATA is deemed excluded from gross compensation income, hence should not be subject to withholding tax. As a clarification, RATA which is granted under Section 34 of the General Appropriations Act is a reimbursement of actual representation and transportation expenses incurred by an official or employee in the performance of his duties for his employer. Under Revenue Regulations No. 12-86, RATA shall not be considered as part of compensation subject to withholding, if the following conditions are satisfied: cdta (1) It is for ordinary and necessary travelling and representation expenses paid or incurred by the official/employee in the performance of his duties for the employer; and (2) The official/employee is required to, and does make an accounting/liquidation for such expenses in accordance with the specific requirements of substantiation for each category of expenses. If the reimbursements or advances exceed the actual expenses, the excess if not returned to the employer constitute taxable compensation income, and should therefore be declared in the recipient's income tax return for the year in which the RATA was received by him. The abovementioned Ruling exempting RATA from the withholding tax, in so far as amounts received as advance or reimbursements have been liquidated, shall apply to taxable year beginning 1991. Any amount of tax withheld from the RATA received by officials or employees from January 1991 shall be credited against their income tax due when the annualized withholding tax is determined as of the year-end 1991 in accordance with Section 22 (b) of Revenue Regulations No. 6-82 as amended. (RMC 60-91 dated July 9, 1991) Please be guided accordingly. Very truly yours, (SGD.) JOSE U. ONG Commissioner (SGD.) EUFRACIO D. SANTOS Deputy Commissioner Officer-in-Charge