BIR Ruling [UN-166-94]

May 30, 1994 BIR RULING [UN-166-94] Philippine National Bank Escolta, Manila Attention: Ms . Teresita S . Cruz Vice President Gentlemen : This refers to your letter dated November 17, 1993 requesting for a ruling as to whether the following items are subject to income tax and consequently to the withholding tax, to wit: 1. P500.00 monthly allowance under Adm. Order No. 53 dated May 17, 1993; and, (annual clothing allowance of P2,000.00; and, 2. Productivity Pay. In reply thereto, please be informed that the P500.00 monthly allowance under Adm. Order No. 53 is subject to income tax as it is considered additional compensation as authorized under the Compensation Adjustment Fund provided under R.A. No. 7645 (Gen. Appropriations Act For 1992). Clothing or uniform allowance given to personnel/employees as officially prescribed is not considered income subject to withholding tax (BIR Ruling No. 55-89). cdtech Pursuant to Rule X, Section 7, paragraph (c) of Book V of Executive Order No. 292 and Omnibus Rules of the Civil Service, productivity incentives shall be given to an employee or group of employees who have exceeded their targets, or have incurred incremental improvement over existing targets. Accordingly, the productivity incentives pay shall form part of compensation subject to tax and consequently to the withholding tax prescribed by Section 72, Chapter 10, Title II of the Tax Code, as amended by B.P. Blg. 135 and as implemented by Revenue Regulations No. 6-82, as amended (BIR Ruling No. 332-93 dated July 21, 1993). Very truly yours, ALICIA P. CLEMENO Acting Assistant Commissioner (Legal Service)