BIR Ruling [UN-233-95]

June 28, 1995 BIR RULING [UN-233-95] Union Insurance Society of Canton, Ltd. 7th Floor Cattleya Bldg. 235 Salcedo St., Legaspi Village Makati, Metro Manila Attention: Mr . Dudley G . Bates Manager Gentlemen : This refers to you letter dated February 9, 1995 stating that the Union Insurance Employees Association (UISEA) is currently negotiating for the renewal of your Collective Bargaining Agreement (CBA) for 1994-1996; that one of the economic issues is the tax exemption of overtime allowance to cover meal and transportation, viz: aisadc Allowances Meal Transportation Total a) Less than two hours work None None None b) Over two hours to less than four hours work P30.00 P20.00 P50.00 c) Over four hours work P60.00 P20.00 P80.00 and that at present, you have 21 Rank-and-File members or employees. In connection therewith, you now in effect request for a ruling that the said allowances are not part of compensation income and therefore, exempt from the withholding tax on wages. In reply, please be informed 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 employees 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. Such being the case, the said allowances need not be included as part of compensation subject to withholding tax prescribed by Section 72 in relation to Section 21 (a) of the Tax Code as implemented by Revenue Regulations No. 6-82 as amended, since the same is of relatively small value and offered by your company to promote goodwill, contentment, and efficiency of your employees. (BIR Rulings No. 549-93 dated December 29, 1993) Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)