BIR Ruling [UN-193-94]

June 30, 1994 BIR RULING [UN-193-94] Commission on Audit Commonwealth Avenue Quezon City Attention: Ms . Lourdes B . Dimapilis Director Planning, Financial and Management Office Gentlemen : This refers to your letter dated March 7, 1994 stating that pursuant to the provisions of R.A. 7305 otherwise known as the Magna Carta for Public Health Workers, you issued guidelines COA Memo # 94-013 dated February 21, 1994 implementing said Republic Act to cover COA officials and employees assigned at the Medical and Dental Division, COA Central Office, and in the auditing units of hospitals, sanitaria, health centers and other health related establishments; that by the very nature and scope of their duties and responsibilities, the above-mentioned COA officials and employees are deemed "public health workers" within the contemplation of R.A. 7305 and as such entitled to the benefits provided in the law, hence you now request for opinion whether the following are subject to tax namely: cdt 1. Hazard allowance 25%/5% of monthly basic salary (implementation by phases within 5 years) 2. Subsistence allowance P30.00 per working day; and 3. Laundry allowance P50.00 per month 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 subject to withholding 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". Such being the case, the subsistence allowance of P30.00 per day and the laundry allowance of P50.00 per month need not be included as part of compensation subject to withholding tax since they are given to your employees as a means of promoting the health, goodwill, contentment or efficiency of the employees and they are of "relatively small value". However, the hazard allowance equivalent to 25%/5% of your employee's monthly basic salary with implementation by phase within five (5) years is considered compensation income subject to withholding tax because it does not fall within the meaning of the term "facilities or privileges" as defined under Section 2(a) of Revenue Regulations No. 6-82, as amended by Revenue Regulations No. 12-86. (BIR Ruling # 21(a) 29-332-93 023-94). Very truly yours, ALICIA P. CLEMENO Acting Assistant Commissioner (Legal Services)