Taxability of U.S. Forces direct-hire Filipino Employees

December 4, 1990 BIR RULING NO. 225-90 28 065-90 225-90 Gentlemen : This refers to your letter dated August 1, 1990 stating that all U.S. Forces direct-hire Filipino employees receive a rice allowance amounting to P525.00 per quarter; that this allowance is paid in cash, and that the current practice of the U.S. Forces is to withhold tax from all monies distributed to employees regardless of whether they are wages, bonus or allowances; that this practice has been questioned by the employees union who referred to BIR Ruling No. 29-86/217-87 dated July 1987. aisadc You now request for a ruling on whether or not your practice of withholding the tax on said rice allowance is proper, and if not that you be provided with a determination letter which will serve as a legal basis for a change. In reply, please be informed that pursuant to 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, " 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 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, the rice allowance worth P525.00 per quarter which all U.S. Forces direct-hire Filipino employees are receiving from you need not be included as part of compensation subject to the withholding tax. (Sec. 2, Revenue Regulations No. 6-82, as amended by Revenue Regulations No. 12-86; BIR Ruling No. 23-85) cdt Very truly yours, (SGD.) VICTOR A. DEOFERIO, JR. Deputy Commissioner