Loyalty Award/Cash Bonus - Subject to Income Tax

July 8, 1993 BIR RULING NO. 307-93 LOYALTY AWARD/CASH BONUS SUBJECT TO INCOME TAX 21 (c) 251-92 307-93 Mr. Rogelio A. Bayan c/o Philippine Ports Authority Marsman Bldg., South Harbor Port Area, Manila Reference is made to your letter of February 11, 1993 which was referred to this Office on March 22, 1993 by the Office of the President of the Philippines for reply to your query as to whether the grant of loyalty award to deserving government officials and employees in the form of cash bonus is 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 rendered 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, loyalty award granted to deserving government officials and employees in the form of cash bonus is 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. cdtech LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue