13th Month Pay Considered Compensation Subject to Tax

July 8, 1993 BIR RULING NO. 294-93 13TH MONTH PAY CONSIDERED COMPENSATION SUBJECT TO TAX 21 (c) 51-92 94-93 Dr. Lucita G. Tilanduca Professor, School of Arts & Sciences Bukidnon State College Malaybalay, Bukidnon Reference is made to your letter of March 5, 1993 which was referred to this Office by the Office of the President of the Philippines on April 21, 1993 for reply to your query as to whether your 13th month pay and P1,000.00 cash gift are subject to tax. In reply, please be informed that pursuant to Section 2 of Revenue Regulations No. 6-82, as amended by Revenue Regulations No. 12-86, the term "compensation" means all remunerations for services performed by an employee for his employer, unless specifically excepted under Sections 28 and 71 of the Tax Code, as amended. The name by which the remunerations for services is designated is immaterial. Thus, salaries, wages, emoluments and honoraria, bonuses, allowances, fringe benefits, fees, including director's fees, taxable pensions and retirement pay and other income of similar nature, constitute compensation income. Such being the case, your 13th month pay and P1,000.00 cash gifts are considered compensation subject to income tax under Section 21(a) of the Tax Code, and consequently to the withholding tax on wages prescribed by Section 72, Chapter X, Title II of the same Code, as amended, and implemented by Revenue Regulations No. 6-82, as amended. aisadc LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue