Withholding Tax on Reimbursement of the 70% of the Actual Medical Expenses of the Employees' Dependents

September 22, 1989 BIR RULING NO. 205-89 28 171-89 205-89 Gentlemen : This refers to your letter dated September 1, 1989 requesting a ruling on behalf of your client, Johnson & Johnson (Philippines) Inc. as to whether the reimbursement of seventy percent (70%) of the actual medical expenses of the employees' dependents; and if the reimbursement will not exceed one hundred pesos (P100.00) a month or a total of one thousand two hundred pesos (1,200.00) a year per employee regardless of the number of their dependents who got sick during the month/year are not considered compensation income subject to withholding tax. In reply thereto, I have the honor to inform you that Section 2(a) of Revenue Regulations NO. 6-82 as amended by Revenue Regulations No. 12-86 implementing Section 28 of the Tax Code, as amended by Executive Order No. 37, provides that facilities or privileges (such as entertainment, medical services, or so called courtesy discounts on purchases) furnished or offered by an employer to his employees generally, are not considered as compensation subject to withholding tax if such facilities or privileges are of relatively small value and are offered or furnished by the employer merely as a means of promoting the health, goodwill, contentment or efficiency of his employees. Considering that the aforementioned reimbursement of the 70% of the actual medical expenses of the employees' dependents and/or reimbursement of the amount of P1,200 a year per employee regardless of the number of their dependents who got sick during the month/year are not of relatively small value , the same are considered compensation income subject to withholding tax prescribed under Section 21(a) in relation to Section 72 of the Tax Code as amended by Executive Order No. 37 and as implemented by Revenue Regulations No. 6-82 as amended by Revenue Regulations No. 12-86. cdt Very truly yours, (SGD.) JOSE U. ONG Commissioner