BIR Ruling [UN-201-95]

May 31, 1995 BIR RULING [UN-201-95] Monterey Farms Corporation PCPD Building Sitio Santo Nio de Bonifacio West Bicutan, Tagig, Metro Manila Attention: Atty . Amado A . Colon Counsel Gentlemen : This refers to your letter dated March 20, 1995 requesting confirmation of your opinion that the meat subsidy given to the rank and file employees of your corporation which is monetized is not subject to income tax and consequently to the withholding tax. cdtech It is represented that you are a domestic corporation engaged in the business of breeding, growing of livestocks, selling of live hogs and cattle and processed meat products; that you have cattle and hog farms located throughout the country and a processing plant at Dasmarias, Cavite; that for the past years, you gave monthly meat subsidy of two (2) kilos of pork for each rank and file employee working in the farms; that the hogs were slaughtered by the employees themselves and distributed at 2 kilos each employee; that this practice was however stopped because the National Meat Inspection Commission (NMIC) questioned the same as it posed health hazards to the animals and employees considering that the hogs were slaughtered outside the slaughterhouse and besides, it violated the bio-security measures of the farms; that the removal of this subsidy somewhat affected the morale and efficiency of said employees; and that, you intend to give back the meat subsidy but this time in cash amounting to P150.00 per month which is equivalent to the prevailing market price of 2 kilos of pork. In reply, 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 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 employers ." Such being the case, the meat subsidy given to your employees need not be included as part of compensation subject to withholding tax, since the same is of relatively small value and offered by your company to promote goodwill, contentment and efficiency of your employees (Rev. Regs. No. 6-82, as amended by Rev. Regs. No. 12-86). (BIR Ruling No. 087-94 dated April 6, 1994) Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)