One Sack of Rice Per Month Given to Employees is Not Considered Compensation Income Subject to Withholding Tax

July 27, 1987 BIR RULING NO. 217-87 28 29-86 217-87 Gentlemen : This refers to your letter dated July 10, 1987 requesting confirmation of your opinion to the effect that the one (1) sack of rice per month which your client, Jacinto Iron and Steel Corporation distributes to its employees is not considered compensation income subject to withholding tax. It is represented that your client distributes one (1) sack of rice per month to each of its employees, free of charge, and that each employee is entitled to such one (1) sack of rice regardless of his salary, position, nature and extent of services rendered during the month. 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 employee generally, are not considered as compensation subject to withholding 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 . Such being the case, since the one (1) sack of rice is given by your client to its employees' with the end in view of promoting its employee's health, goodwill, contentment and efficiency, said benefit is not considered compensation income/wages, hence not subject to withholding tax prescribed under Section 21 (a) in relation to Section 82 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 12-86. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner