Withholding of the 50% Portion of the Cost of the Car

December 19, 1988 BIR RULING NO. 585-88 28 000-00 585-88 Gentlemen : This refers to your letter dated October 27, 1988 stating that the SSS in implementing a Car Loan Program at 10% interest per annum for its officials wherein the official concerned pays 50% of the cost spread over a period of five (5) years in sixty equal monthly installments and the SSS pays the other half, if the official stays in the service for at least five (5) years; that should he leave before the 5-year period, then he pays the balance of his share and the SSS share to the extent of the unserved period; that the Car Loan Program was launched recently in order to enable the officials concerned to meet the demands of their work with facility and efficiency having due regard to their status and official functions; and that it is aimed to attract to the service qualified professional and technical people which is difficult to recruit because of compensation constraints and to hold in the service officials who have been developed and trained in their respective areas of work. In connection therewith, you now request a ruling as to whether the 50% portion of the cost of the car payable by you if the employee stays in the service for five (5) years or such portion thereof as may be charged against you is subject to withholding tax considering that the same is in the nature of a privilege granted by you to enhance efficiency and job satisfaction of your officials. In reply thereto, I have the honor to inform you that the 50% portion of the car payable by you or such portion thereof as may be charged against you are considered compensation income/wages of the employees subject to withholding. It is noted that under Section 2 of Revenue Regulations No. 6-82, as amended, only facilities or privileges which are of relatively small value are not considered as compensation subject to withholding. This is not so in the case of the said 50% portion of the cost of the car payable by you or such portion thereof as may be charge against you under your Car Loan Program. aisadc Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner