BIR Ruling [UN-002-A-95]

January 3, 1995 BIR RULING [UN-002-A-95] Clarion Mitsuwa Philippines, Inc. Phase II, Block & Export Processing Zone Rosario, Cavite Attention: Mr . Kuniaki Noya Director/Treasurer Gentlemen : This refers to your letter dated August 23, 1994, requesting for a ruling on whether the meal subsidy and rice and transportation allowances which the company gives to its Managers, Assistant Managers and Supervisors are exempt from withholding tax on compensation income. cdtech It is represented that the company is located at the Cavite Export Processing Zone in Rosario Cavite; that nine (9) of its Key personnel are residents of Metro Manila and some of them are commuting daily while others have opted to stay in dormitories in Cavite and go home only on weekends; and that you have decided to give each of the said Key personnel the following monthly allowances, namely: Supervisors : 1. Meal Subsidy of P500.00 2. Rice Allowance of P500.00 Assistant Managers : 1. Meal Subsidy of P800.00 2. Rice Allowance of P700.00 Managers : 1. Meal Subsidy of P800.00 2. Rice Allowance of P700.00 3. Transportation Allowance of P500.00 It is your estimation that the meal subsidy of P800.00 a month is equivalent to approximately P30.00 a day for 26 days, the rice allowance is equivalent to one sack of rice at P700.00 per sack while the transportation allowance will cover trips to and from Cavite at P15.00 to P20.00 per trip. In reply, 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, the aforesaid allowances given by that company to its Key personnel, i.e., a daily meal allowance of P30.00, a rice allowance of P700.00 a month which is equivalent to one (1) sack of rice at the prevailing/present price and a daily transportation allowance of P15.00 to P20.00 per trip, 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 said employees. (BIR Ruling Nos. 030-93 and 553-93). cdtech Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)