Withholding Tax on Performance Bonus Award, Relay Station Allowance and Danger Exposure Allowance

September 21, 1989 BIR RULING NO. 204-89 28 066-84 204-89 Gentlemen : This refers to your letter dated April 17, 1989 in effect, requesting clarification as to whether performance bonus award, relay station allowance and danger exposure allowance are considered compensation income subject to withholding tax. aisadc It is represented that the performance bonus award is an annual one time cash award scheme ranging from P300.00 up to P2,400.00 given in recognition to individual contribution to the company's annual performance to encourage teamwork, improve performance and above all to involve all employees in trying to meet company goals; that the relay station allowance equivalent to P150.00 a month is being extended by your company to all the employees working in relay stations irrespective of employment status in recognition of the isolation and difficulties encountered by your personnel assigned at the various relay stations which are generally located in the mountains; that the danger exposure allowance is being extended by your company to employees who are or have actually been performing the duties and responsibilities of a job where exposure to injury or harm is inherent in the discharge of its function in the amount of P10.00 per worked day or an average of P220.00 a month for employees classified under group 1 and P4.00 per worked day or an average of P88.00 a month for employees classified under group 2. In reply, please be informed that performance bonus award; relay station allowance and danger exposure allowance are embraced within the term compensation, which means all remuneration for services, performed by an employee for his employer not specifically excepted (Sec. 2, Rev. Reg. No. 6-82) Accordingly, since the foregoing are not specifically excepted under Section 27, 28 and 71 of the Tax Code, the same are subject to withholding tax pursuant to Revenue Regulations Nos. 6-82 and 12-86. Moreover, under Section 2 of Revenue Regulations No. 6-82, as amended, only facilities or privileges which are relatively of small value are not considered as compensation subject to withholding tax. This is not so in the case of performance bonus award, relay station allowance and danger exposure allowance. cd Very truly yours, (SGD.) JOSE U. ONG Commissioner