BIR Ruling No. 389-11

October 20, 2011 BIR RULING NO. 389-11 RMC No. 27-2011; 00-000 Business Process Outsourcing International, Inc. 7/F, SGV II Building 6758 Ayala Avenue 1226 Makati City Attention: Lucila T. Villanueva Senior Customer Service Director Gentlemen : This refers to your letter dated May 19, 2011 requesting for a formal clarification whether or not the whole amount of one of your client's employees who wants to be deducted a One Hundred Thousand Pesos (Php100,000.00) Home Development Mutual Fund (HDMF/Pag-Ibig) monthly contribution may be treated as a deduction from the said employee's taxable income. Attached to your request is BIR Ruling (DA-087-06) which rendered an opinion regarding Section 32 (B) (7) (f) of the National Internal Revenue Code (NIRC) of 1997, to wit: "Since the law and the implementing regulations do not categorically state that the exemption covers only the regular GSIS and Pag-Ibig contributions, it is safe to conclude that GSIS optional and Pag-Ibig 2 are likewise excludible from the gross income of the taxpayer and hence exempt from income tax." In reply, please be informed that BIR Ruling No. 002-99 and BIR Ruling (DA-087-06) have been revoked by Revenue Memorandum Circular (RMC) No. 27-2011 dated July 1, 2011 which provides, viz.: "Therefore, contributions referred to in Section 32 (B) (7) (f) of the NIRC of 1997 cover only the mandatory/compulsory contributions of the concerned employees to SSS, GSIS, PHIC and HDMF. Thus, this Office holds that voluntary contributions in excess to what the law allows to these institutions are not excludible from the gross income of the taxpayer and hence not exempt from Income Tax and Withholding Tax. Consequently, the exemption from withholding tax on compensation referred to in Section 2.78.1 (B) (12) of Revenue Regulations (RR) No. 2-98 shall apply only to mandatory/compulsory GSIS, SSS, Medicare and Pag-Ibig contributions. AaITCH In this regard, BIR Ruling Nos. 002-99, DA-184-04, DA-569-04, DA-087-06 are hereby revoked and invalidated, and all revenue issuance inconsistent with this Circular are deemed repealed." A copy of RMC No. 27-2011 is herewith attached for your information and appreciation. Please be guided accordingly. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue ATTACHMENT Revenue Memorandum Circular No. 027-11 July 1, 2011