BIR Ruling [UN-217-94]

1994 BIR RULING [UN-217-94] Lepanto Consolidated Mining Co. BA-Lepanto Building 8747 Paseo de Roxas 1226 Makati, Metro Manila Attention: Mr . Pablo T . Ayson, Jr . Acting Head Administration Department Gentlemen : This refers to your letter dated October 18, 1993 stating that in line with your Company's policy of extending meaningful medical assistance to, and in the promotion of the health, goodwill, contentment and efficiency of your employees, an outpatient benefit was integrated in your Company's Medical and Hospitalization Plan granting reimbursement for medical (out-patient) expenses of its Makati-based employees in the initial amount of P600.00 per year in 1983, which was increased to P1,000.00 in 1985; to P1,500.00 in 1989; to P2,500.00 in 1991; and, effective July 1, 1993, to P2,750.00, taking into consideration the rise in the cost of medical expenses; that your present practice is for the employees to advance the payment of their doctor's consultation fees and purchases of medicine, subject to a reimbursement scheme; and that since you find the existing practice to be cumbersome, you are now in the process of streamlining the procedure whereby the amount of the annual out-patient benefit would be advanced to the employees for their medical expenses for the year. Based on the foregoing, you now request for a ruling that the said out-patient benefit be excluded from gross compensation income and withholding tax. cdta In reply, please be informed that pursuant to Section 2(a) of Revenue Regulations No. 6-82 as amended by Rev. Reg. 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 medical allowance of P2,750.00 per year or P229.16 per month 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 its employees (Rev. Reg. 6-82 as amended by Rev. Reg. 12-86; BIR Ruling No. 030-92 dated January 20, 1992) Very truly yours, ALICIA P. CLEMENO Acting Assistant Commissioner Legal Service