BIR Ruling [UN-037-94]

February 4, 1994 BIR RULING [UN-037-94] Sycip Gorres Velayo & Co. 6760 Ayala Avenue, Makati Metro Manila Attention: Atty . J . A . Osana Gentlemen : This refers to your letter dated May 5, 1993 stating that in accordance with R.A. No. 1161 otherwise known as the SSS Law, as amended by R.A. No. 7322 dated March 30, 1992 Warner-Lambert Philippines, Inc. (WLPI) has been paying its women employees a basic maternity leave pay equivalent to the employees daily payroll rate multiplied by 78 or 60 maternity days, in case of caesarian or normal delivery (miscarriage or abortion) respectively; that under Section 1 of R.A 7322 a female employee is entitled to a daily maternity leave benefit equivalent to one hundred percent (100%) of her present basic salary, allowances and other benefits or the cash equivalent of such benefits for sixty days; that although the SSS is bound under the law to reimburse an employer of 100% of the amount of maternity benefits advanced by the latter to its employees, WLPI in most cases is actually reimbursed by SSS for an amount lower than the total amount of maternity leave pay given to its employee; that under the maternity assistance program, WLPI likewise provides its women employees the following amounts as maternity assistance benefits during their child delivery as supplementary to the maternity leave pay granted under the SSS law, to partially cover their actual hospitalization and related costs: (1) Caesarian Section P4,000 first and second operations, P3,000 third and fourth operations (2) Normal Delivery P1,500; (3) Miscarriage/Accidental Abortion P1,000; (4) Home-delivery P800.00; that the aforesaid amounts are net of the employee's medicare benefits; and that the maternity assistance is limited to four (4) deliveries, miscarriages or accidental abortion. In connection therewith, you now request confirmation of your opinion to the effect that the basic maternity leave pay given by WLPI to its women employees in accordance with the SSS law as amended by RA 7322 as well as the maternity assistance benefits given to the same employees upon childbirth to partially cover their actual hospitalization and related costs are exempt from income tax and consequently from withholding tax. In reply thereto, I have the honor to inform you 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 by Executive Order No. 37, "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." (Emphasis supplied) Such being the case, the basic maternity leave pay given by WLPI to its women employees in accordance with RA No. 1161 as amended by RA 7322 otherwise known as the SSS Law as well as the maternity assistance benefit given to the same employees upon childbirth to partially cover their actual hospitalization and related costs: (1) caesarian section P4,000 first and second operations; P3,000 third and fourth operations (2) normal delivery P1,500; (3) miscarriage/accidental abortion P1,000; (4) Home delivery P800 need not be included as compensation subject to withholding tax since the same is of relatively small value and offered by the employer to promote goodwill, contentment and efficiency of the employees. (Revenue Regulations No. 6-82 as amended by Revenue Regulations No. 12-86; BIR Ruling No. 370-92 dated December 23, 1992) Very truly yours, JAIME M. MAZA Assistant Commissioner (Legal Office)