BIR Ruling [UN-139-94]

April 19, 1994 BIR RULING [UN-139-94] Flow System, Inc. P.O. Box 1348, MCC Makati, Metro Manila Gentlemen : This refers to your letters dated October 29, 1993 requesting for a ruling as to whether the economic assistance you will give your employees consisting of a monthly rice allowance of P1,000.00 and uniform allowance of P2,000.00 per year is exempt from income tax and consequently from withholding tax. cdtech 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 by Executive Order No. 37, facilities or privileges furnished or offered by an employer to his employees generally are not considered as compensation income subject to tax if such facilities or privileges are of relatively small value and are offered or furnished by the employer as a means of promoting the health, goodwill, contentment or efficiency of his employees. Such being the case, the rice allowance of P700.00 a month need not be included as part of compensation subject to withholding tax, considering that the value of a good quality/class of one sack of rice prevalent these days would not be less than the stated amount and since the same is of relatively small value offered by a company to promote the goodwill, contentment and efficiency of the employees, (Rev. Reg. 6-82 as amended by Rev. Reg. No. 12-86). Consequently, the amount of P1,000 rice allowance you give your employees every month is subject to income tax since this is more than the value of one sack of rice in the market today. Moreover, under BIR Ruling No. 55-89 it was ruled that clothing or uniform allowance given to personnel/employees as officially prescribed is not considered income subject to withholding tax. Therefore, the uniform allowance you will give yearly to your employees in the amount of P2,000 is not subject to withholding tax, taking into consideration that some companies prescribed four sets of uniform to be worn in a week for one year. cd Very truly yours, JAIME M. MAZA Assistant Commissioner (Legal Service)