BIR Ruling [UN-016-95]

January 6, 1995 BIR RULING [UN-016-95] Philippine Automotive Manufacturing Corporation Ortigas, Avenue Extension Cainta, Rizal Attention: Messrs . Godofredo S . Mariano Manager, Finance Department and Dante R . Creencia President, Salaried Labor Union Gentlemen : This refers to your letter dated January 3, 1994 stating that as a practice your company, in addition to the benefits provided by law, give maternity benefits equivalent to the difference between the benefit provided by law and the salary of the qualified female employee; that as an example, an employee who enjoys a salary rate of P320.00 per day delivers a child through normal delivery is given maternity benefits computed as follows: P 320.00 x 60 days = P19,200.00 SSS Maternity Benefit = 10,000.00 Net Maternity Benefit Expense of the Company = P9,200.00 ======== In connection therewith, you are requesting opinion as to whether the net maternity benefit expense of your company of P9,200.00 in the aforementioned example is subject to tax. In reply thereto, please be informed that 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 by Executive Order No. 37, provides that facilities or privileges (such as entertainment, medical services, or so called courtesy discounts on purchases) furnished or offered by an employer to his employees generally, 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 . However, the aforementioned "Net Maternity Benefit Expense of the Company of P9,200.00" can not be considered as facilities or privileges or relatively small value. Accordingly, said "Net Maternity Benefit Expense of the Company of P9,200.00" is considered compensation income/wages subject to withholding tax prescribed under Section 21(a) in relation to Section 72 both of the Tax Code, as amended. (BIR Ruling No. 529-88 dated November 7, 1988) cd Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)