Loyalty Awards/Cash Bonus Taxable

May 3, 1993 BIR RULING NO. 177-93 LOYALTY AWARDS/CASH BONUS TAXABLE 21 (C) 252-92 177-93 Development Bank of the Philippines Makati, Metro Manila Attention: Mr . Florentino A . Tuason, Jr . Chief Legal Counsel This refers to your letter, dated 22 December 1992, requesting for a ruling on 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 remuneration 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 pay 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, and implemented by Revenue Regulations No. 6-82, as amended. aisadc VICTOR A. DEOFERIO, JR. Deputy Commissioner of Internal Revenue