Taxability of Monetized Vacation and Sick Leave Credits of Employees

September 16, 1992 BIR RULING NO. 264-92 21 (a); 72 165-92 264-92 Consolidated Orix Leasing & Finance Corporation 17th Floor, Solidbank Building 777 Paseo de Roxas, Makati, Metro Mla. Attention: Atty . Gabriel G . Ledesma Gentlemen : This refers to your letter dated March 9, 1992 requesting for a ruling on whether or not vacation and sick leave credits of your employees which are converted into cash at the end of the year are subject to income tax and consequently, to the withholding tax on wages prescribed by Section 72, Chapter 10 Title II of the Tax Code, as amended. In reply, please be informed that the monetized unused vacation leave credits not exceeding ten (10) days during the year are not subject to income tax and consequently, to the withholding tax. (BIR Ruling 031-92, dated January 23, 1992; and BIR Ruling No. 99-92, dated March 20, 1992). However, considering that monetization of leave credits is the payment of the money value of the accumulated vacation leave credits without actually going on leave of absence, the monetization of leave credits , therefore, shall not apply to sick leave credits because the employee who avails of the sick leave credits has to go on sick leave. (BIR Ruling No. 99-92). Very truly yours, JOSE U. ONG Commissioner of Internal Revenue