Taxability of the Representation and Transportation Allowance of an Acting Dean of a Private College

August 27, 1992 BIR RULING NO. 235-92 21 (a) 00-00 35-92 Mr. Raymundo D. Canonizado No. 3 Purple Street SSS Village, Marikina Metro Manila S i r : This refers to your letter dated December 24, 1991 requesting for an opinion on whether or not your representation and transportation allowance (RATA) as acting dean of a private college is exempt from income tax and consequently, from the withholding tax. LLjur It is represented that you are the acting dean of a college in the outskirts of Metro Manila; that as such, you are given a transportation allowance of P1,500.00 a month; that your Finance Officer subjects this allowance to withholding tax on wages; that you have actually spent some P14,250.00 as transportation expenses for the taxable year 1991; and finally, that you would like to avail of the tax relief under BIR Regulations No. 12-86, particularly Section 2(2)(c) thereof. In reply, please be informed that BIR Ruling No. 62-91 dated April 15, 1991, as published and circularized in RMC 60-91 dated July 9, 1991, held in effect that RATA is in fact a reimbursement for the expenses incurred in the performance of one's duties rather than as an additional compensation and therefore are not compensation subject to withholding, pursuant to Section 2(2)(c) of Revenue Regulations No. 12-86. However, although the amount of RATA is not subject to withholding, the excess of RATA, if not returned to the employer, constitutes taxable income which should be declared in the recipient's income tax return for the year in which the RATA was received by him. Although the above-stated BIR Ruling No. 62-91 specifically dealt with government officials only, particularly those holding the ranks of Chiefs of Division up to Department Secretaries identified and authorized to receive RATA under the Personal Services Itemization of the General Appropriations Act, there appears no cogent reason for this Office to deny the application of the said Ruling to non-government employees who are similarly situated. RMC 60-91 provides that any amount of tax withheld on RATA received from and beginning on January, 1991 by the concerned official/employee shall be credited against his income tax due for 1991, when the annualized withholding tax is determined in accordance with Section 22(b) of Revenue Regulations No. 6-82, as amended by Revenue Regulations No. 12-86. It is therefore the opinion of this Office as it hereby holds that where the RATA of non-government employees, as in your case, is a mere reimbursement of expenses for the benefit of the employer, said RATA is not taxable against the recipient thereof provided, however, that substantiation requirements are fully complied with. Furthermore, the excess of such RATA, if not returned or accounted for, shall be taxable against said employee-recipient of the RATA. cdti Very truly yours, JOSE U. ONG Commissioner of Internal Revenue