Whether Rice Subsidy is Not Part of Compensation Income and, Therefore, Exempt from the Withholding Tax on Wages

October 7, 1992 BIR RULING NO. 278-92 28 095-91 278-92 Business Risks International 2/F, Singapore Airlines Building 138 H.V. Dela Costa Street, Salcedo Village Makati, Metro Manila Attention: Ms . Marie B . Pascual Gentlemen : This refers to your letter dated 24 April 1992 stating that you are providing your employees with rice subsidy every month in the amount of Three Hundred Fifty (P350) Pesos only. In connection therewith, you now request for a ruling that the said subsidy is not part of compensation income and, therefore, exempt from the withholding tax on wages. In reply, please be informed that 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 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. Such being the case, the said rice subsidy of P350.00 per month is not considered compensation income/wages; hence, it is not subject to the withholding tax prescribed by Section 72 in relation to Section 21 (a) of the Tax Code as implemented by Revenue Regulations No. 6-82 as amended, since the same is of relatively small value and offered by the employer to promote goodwill, contentment, and efficiency of its employees. aisadc Very truly yours, JOSE U. ONG Commissioner of Internal Revenue