Request for Exemption from Income Tax of 20% Premium Pay of Contractual Employees Denied

October 18, 1993 BIR RULING NO. 416-93 REQUEST FOR EXEMPTION FROM INCOME TAX OF 20% PREMIUM PAY OF CONTRACTUAL EMPLOYEES DENIED 28 (A) 295-92 416-93 Presidential Committee on the Philippine Nuclear Power Plant 4th Floor, Delegation Building PICC, CCP Complex Roxas Boulevard, Manila Attention: Mr . Mario R . Tuao This refers to your letter dated February 5, 1993 requesting in effect exemption from income tax of the 20% Premium Pay of contractual employees. In reply, please be informed that gross compensation income includes but is not limited to the following items of income: (1) salaries, wages, honoraria; (2) bonuses; (3) allowances; (4) fringe benefits; (5) pensions; and (6) other income of a similar nature, it being understood that the compensation income arises out of employer-employee relationship. The amount subject to withholding tax shall include not only fees, but also per diems, allowances and any forms of income payments such as premium pay. It has been the constant and uniform holding that exemption from taxation is not favored and is never presumed, so that if granted it must be strictly construed against the taxpayer. Affirmatively put, the law frowns on exemption from taxation, hence, an exempting provision should be construed strictissimi juris . (Catholic Church vs. Hastings, 5 Phil. 70; Esso Standard Eastern, Inc. vs. Acting Commissioner of Customs, L-D1841, Oct. 23, 1966, 18 SCRA 488; Phil. Acetylene vs. Comm. of Int. Rev., L-19701, Aug. 17, 1967; 20 SCRA 1056, Comm. of Int. Rev. vs. Guerrero, L-20942 Sept. 22, 1967, 21 SCRA 180; Manila Electric Co. vs. Vera, L-29987, Oct. 22, 1975, 67 SCRA 351) In view thereof, your request for exemption has to be, as it is hereby denied for lack of legal basis. LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue