Meals, Housing and Transportation Allowances of Relatively Small Value - Exempt from Withholding Tax

December 29, 1993 BIR RULING NO. 553-93 MEALS, HOUSING AND TRANSPORTATION ALLOWANCES OF RELATIVELY SMALL VALUE EXEMPT FROM WITHHOLDING TAX 28 (a) 101-93 553-93 Punongbayan & Araullo 6th Floor, Vernida IV Bldg. Alfaro St., Salcedo Village 1200 Makati, Metro Manila Attention: Atty . Rosario S . Bernaldo Tax Partner This refers to your letter dated August 4, 1993 requesting for a ruling, in behalf of your client, on whether the meal, housing, laundry and transportation allowances, which your said client gives to some of its employees, are exempt from withholding tax on compensation income. cdta It is represented that your said client, a construction company whose head office is located in Makati, Metro Manila, is currently undertaking a construction project outside Metro Manila. Some of its personnel, like engineers and accountants, originally stationed in the head office and who are residents of Metro Manila have been temporarily assigned to the project site to work there for the duration of the project estimated from 12 to 18 months. The said project site is relatively remote from the city proper, where these personnel stay after work. In view of this, the company gives each of the aforesaid employees the following allowances, namely: 1. A daily meal allowance (subsidy) of P90.00; and 2. A daily housing, laundry and transportation allowance of P85.00. It is your opinion though that the aforementioned allowances, being so small and intended merely as means of promoting the health, goodwill, contentment and efficiency of the said employees, should not form part of the compensation income subject to withholding tax. In reply thereto, please be informed that 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, "facilities or privileges" furnished or offered by an employer to his employees are not considered as compensation subject to withholding tax 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. In view thereof, your opinion that the aforesaid allowances being given by your client to its employees, i.e., a daily meal allowance of P90.00 and a daily transportation, laundry and housing allowance of P85.00, which are indeed of "relatively small value", need not be included as compensation subject to withholding tax since they are given merely to promote the health, goodwill, contentment and efficiency of the employees, is hereby confirmed. cdtech LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue