BIR Ruling [UN-015-95]

January 9, 1995 BIR RULING [UN-015-95] Joaquin Cunanan & Co. 8th Floor, BA Lepanto Building 8747 Paseo de Roxas Makati, Metro Manila Attention: Mrs . Tomasa H . Lipana Partner Gentlemen : This refers to your letter dated March 23, 1993 requesting confirmation of your opinion that fifty percent (50%) of the housing allowance received by a company executive shall be designated as his compensation and the other fifty percent (50%) shall be deducted as company expense when the house executive is being used for entertainment of company's clients and executives. It is represented that the country manager of your client, Mr. Sonny G. Ramos, constructed a two-storey house within Metro Manila. To cut down on the company's entertainment expenses, his house shall be used to receive and entertain guests from the company's head office and its domestic and overseas clients. For this purpose, he shall be paid a monthly housing allowance. In reply thereto, please be informed that under Revenue Audit Memorandum Order No. 1-87, if an employee receives allowances or reimbursement for housing and such employee, because of his position in the employer-company also uses said house for the benefit of the latter, like entertaining and putting up house guests and guests of employer-company, then fifty percent (50%) of such allowance shall be added to the compensation paid to such employee and shall be subject to the withholding tax on wages. On the other hand, the remaining fifty percent (50%) shall be considered business expense of the company. Accordingly, your opinion that only fifty percent (50%) of the housing allowance received by the country manager shall be included in his taxable compensation while the remaining fifty percent (50%) shall be considered as business expense of the company is hereby confirmed. (BIR Ruling No. 269-91, dated December 23, 1991) cd Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)