RATA Granted to Government Officials are Not Compensation Subject to Withholding Tax

December 23, 1991 BIR RULING NO. 271-91 21 (a) 062-91 132-91 271-91 M a d a m : This refers to your letter dated May 30, 1991 requesting for an adjustment of your taxable income by excluding the RATA in your assessment of taxes due for 1990. It is represented that you have declared a gross income of P255,258.00 representing your salaries and allowances you received from Manila International Airport Authority (MIAA) and the Air Transportation Office (ATO); that your compensation has been classified as "Basic Salary and Cola" in BIR Form No. W-2 although actually this includes your Representation and Transportation Allowance (RATA) of P33,600.00; that in view of this, you hold in abeyance the payment of the second installment of your income tax for the year 1990 as you still expect a refund of P3,365.28. cdta In reply, please be informed that pursuant to BIR Ruling No. 062-91 dated April 15, 1991 representation and transportation allowance (RATA) granted under Section 34 of the General Appropriations Act, to government officials from the rank of Department Secretaries down to Division Chiefs, and those of equivalent rank as may be determined by the Department of Budget & Management are in fact 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 tax, pursuant to the provisions of Section 2 (2) (c) of Revenue Regulations No. 12-86. However, although the amount of RATA is not subject to withholding tax, 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. Moreover, since the aforementioned ruling was issued after the Secretary of Budget and Management confirmed in a letter dated March 8, 1991 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", the aforecited ruling, therefore, cannot be given retroactive application. Accordingly, this Office issued Revenue Memorandum Circular No. 60-91 dated July 9, 1991 providing that the aforecited ruling shall be applicable beginning taxable year 1991. Any amount of tax withheld from RATA received by qualified officials and employees from January, 1991 shall not be refunded, but shall be credited against their income tax due when the annualized withholding tax is determined as of the year end 1991. In view thereof, your request for exclusion of your RATA as part of your gross income for 1990 is hereby denied for lack of legal basis. Accordingly, you are requested to pay the second installment of your income tax due for 1990 plus statutory penalties, within fifteen (15) days from receipt hereof, in case you have not yet paid the same on or before July 15, 1991 as required in the letter to you dated June 19, 1991 of Revenue District Officer Francisco Alejo, Jr., Revenue District No. 34, Paraaque, Metro Manila. cdtech Very truly yours, (SGD.) JOSE U. ONG Commissioner