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Gentlemen :
You stated in your letter dated October 30, 1998, that your company is granting car plan to
the managers and sales executive; that your company buys the car and retains the title for
five years; that sixty percent (60%) of the cost is recorded as asset and depreciated for
five (5) years in the books of accounts; that forty percent (40%) of the cost is recorded as
receivable from the employee and collected within five (5) years interest-free; and that at
the end of the five (5) year period, when sixty percent (60%) of the cost of the car is fully
depreciated and the forty percent (40%) share of the employee is fully paid, title is
transferred to the employee.
Based on the foregoing, you now request for a ruling on the basis of the
computation of the fringe benefit tax. cdasia
In reply, please be informed that fringe benefits which have been furnished, granted or paid
by the employer beginning January 1, 1998 shall be governed by Section 33 of the Tax
Code of 1997, as implemented by Revenue Regulations No. 3-98. Pursuant to Section
2.33(B)(3)(e) of the said regulations:
"(e) If the employer owns and maintains a fleet of motor vehicles for the use of
the business and the employees, the value of the benefit shall be the acquisition
cost of all the motor vehicles not normally used for sales, freight, delivery service
and other non personal use divided by five (5) years. The monetary value of the
fringe benefit shall be fifty percent (50%) of the value of the benefit.
"The monetary value of the motor vehicle fringe benefit is equivalent to the
following:
where:
MV = Monetary value
A = Acquisition cost"
Additionally, the company is further liable to fringe benefits tax under Section 2.33(B)(5)(a)
on interest free loan to the employee computed at the benchmark interest rate of twelve
percent per annum. Thus, the annual fringe benefit tax on interest-free loan for the 40% of
the acquisition cost of the car should likewise be computed and this should be done in the
manner of a usual financing transaction, as follows:
40% of the acquisition cost x 12% p.a. x 5 years
This ruling is being issued on the basis of the foregoing facts as represented. However, if
upon investigation, it will be disclosed that the facts are different, then this ruling shall be
considered null and void.
Gentlemen :
This refers to your letter dated August 27, 2003 requesting for a
clarication for the taxability of the employer's 50% share in a car program for
your sales personnel.
It is represented that you are a company engaged in the manufacture
and distribution of animal feeds; that the company either leases or makes
outright purchases of vehicles for its salesmen's use; that you have a car
program for your sales people: that the company shares 70% of the lease cost
and the employee, 30%; that ocial use shall take precedence over personal
use; and that the vehicle is in the name of the company but at the end of the
lease term, ownership is transferred to the employee.
In reply, please be informed that Section 2.33(B)(3)(f) of Revenue
Regulations No. 3-98 implementing Section 33 of the Tax Code of 1997, reads:
"f) If the employer leases and maintains a eet of motor vehicles
for the use of the business of the employer, the value of the benet
shall be the amount of rental payments for motor vehicles not normally
used for sales, freight, delivery services and other non-personal use.
The monetary value of the fringe benet shall be fty percent (50%) of
the value of the benet."
Such being the case, and since you require your sales personnel to share
at least 30% of the monthly rental and deducted from their payroll subject to
the withholding tax on compensation, this Oce is of the opinion as it hereby
holds that only 20% of the monthly car rental is taxable as fringe benet tax
inasmuch as the 30% share of the employee has already been taxed as
compensation.
This ruling is being issued on the basis of the foregoing facts as
represented. However, if upon investigation, it will be disclosed that the facts
are dierent, then this ruling shall be considered as null and void.
3-98; 2-98-000-00-189-99
Gentlemen :
This refers to your letter dated January 22, 1999 requesting for a ruling, on the taxability of
the educational assistance enjoyed by dependents of some of your faculty members. cdtai
that once the dependent of the faculty quali es for the TWB, he/she may then enroll
without paying the tuition fee in any program of DLSU; that to continue enjoying the
bene t, the quali ed dependent should comply with the following restrictions as
provided in the 1997-2000 DLSU Student Handbook, pp. B30-31:
1. His/her cumulative GPA at the end of the third trimester of any school
year of his/her residence in the University should not be less than 1.0.
for freshmen, the cumulative GPA is assessed at the end of three
consecutive trimesters starting from the term of entry.
2. He/she should not incur 15 or more units of failure in academic courses
by the end of each year if he/she is an upperclassman. If he/she is a
freshman, he/she should not fail 18 units or more in academic
courses by the end of the third trimester starting from the term of
entry.
3. He/she should not have an accumulated failure of 24 units or more in
academic courses anytime prior to the trimester when the only
remaining load necessary for completion of his/her degree program
is 57 or fewer academic units.
In reply, please be informed that Section 2.33(A)(9)(b) provides that the cost of
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educational assistance extended by an employer to the dependents of an employee shall
be treated as taxable fringe benefits of the employee unless the assistance was provided
through a competitive scheme under the scholarship program of the company. LibLex
Such being the case, since the educational benefit is granted through a competitive
scheme, i.e. qualifying exam, such educational assistance shall not be subject to the fringe
benefit tax prescribed under Section 33 of the Tax Code of 1997.
However, the exemption of any fringe benefit from the fringe benefit tax imposed under
Section 33 of the Tax Code of 1997 and implemented by Revenue Regulations No. 3-98,
shall not be interpreted to mean exemption from any other income tax imposed under the
Code or under any other existing law. Thus, if the fringe benefit is exempted from the fringe
benefit tax, the same may, however, still form part of the employees' gross compensation
income which is subject to income tax, hence, likewise subject to withholding tax on
compensation income.
Such being the case, the amount of the tuition waiver benefit granted to the children of full
time faculty members who were in the active service before May 1987 shall be considered
as part of compensation income of said faculty members which shall be subject to
withholding tax prescribed under Section 79 of the Tax Code of 1997. cda
Gentlemen :
This refers to your letter dated February 11, 1998 requesting, on behalf of all the rank-and-
file employees of Philippine Long Distance Telephone Company (PLDT), for a ruling that
fringe benefit in the form of Educational Assistance granted by the PLDT Management in
the recently concluded Collective Bargaining Agreement is not taxable on the part of the
recipients thereof; that such educational assistance is a valid deductible business expense
to PLDT. Furthermore, should this benefit be considered a valid deductible business
expense, opinion is sought from this Office as to the maximum amount of educational
assistance per rank-and-file employee that may be allowed as deduction. LexLib
Gentlemen :
This refers to your letter dated February 16, 2005 requesting on behalf of your client, NEC
Tokin Electronics (Philippines), Inc. ("NEC Tokin" for brevity) for confirmation of your
opinion that premiums for the group hospitalization benefits it provides to its non-rank and
file employees under a Health Maintenance Organization (HMO) are not subject to fringe
benefits tax (FBT) under Sec. 2.33 (B)(10) of Revenue Regulations No. 3-98. CHDAEc
(a) contributions of the employer for the benefit of the employee, pursuant
to the provisions of existing law, such as under the Social Security
System (SSS), (R.A. No. 8282, as amended) or under the Government
Service Insurance System (GSIS) (R.A. No. 8291), or similar
contributions arising from the provisions of any other existing law;
and
(b) the cost of premiums borne by the employer for the group insurance of
his employees." (emphasis supplied)
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Although technically a health maintenance organization (HMO) is not an insurance
company subject to registration and regulation by the insurance Commission, the service
rendered by such HMOs are akin to the service provided by insurance companies. Thus, in
Revenue Memorandum Circular No. 04-03, dated December 31, 2002, in defining insurance
and pension funding companies, this is clarified, to wit:
"(ii) Insurance and pension funding companies refer to those engaged in life and
non-life insurance business as defined under the Insurance Code AND pre-need
companies, including health maintenance organizations. Their gross receipts
shall mean actual or constructive receipts representing: net retained premiums
(gross premiums net of returns, cancellations, and premiums ceded)/gross
premium or collection from planholders; membership fees (in the case of HMOs);
xxx xxx xxx" (emphasis supplied)
(2) Medical cash allowance to dependents of employees not exceeding P750 per
semester or P125 per month;
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xxx xxx xxx" (emphasis supplied)
On the basis of the foregoing, BIR Ruling No. DA-364-03 , dated October 13, 2003, states
that:
"The following shall be considered as de minimis benefits not subject to income
tax as well as withholding tax on compensation income of both managerial and
rank and file employees:
In your supplemental letter to this Office, it is stated that the annual premium paid for
dependents of assistant managers is P9,890.00 and for dependents of supervisors,
P7,831.00, depending on the age of the dependent, and that the premium payment is not
shouldered by NEC Tokin, but is paid by employee-supervisor through salary deduction.
Applying the rate of P 125.00 per month to an annual basis, the annual ceiling for de
minimis benefits given as cash allowance to dependents of employees is P 1,500.00 per
employee per year. To this extent, therefore, the premiums paid to HMOs by NEC Tokin are
not subject to fringe benefits tax, income tax, nor to withholding tax on compensation.
However, any amount in excess of the ceiling may further be considered as part of other
benefits, provided that the total benefits shall not exceed P30,000.00. Further still, that the
amount in excess of the P30,000.00 threshold of the total of "other benefits" shall be
included as part of the taxable compensation of the employer-taxpayer.
3. On the third issue
The premiums initially paid by NEC Tokin to Health Maintenance, Inc. on behalf of the
dependents of its supervisors pursuant to the group insurance plan do not constitute
fringe benefits or income to said supervisors. The amount of the premiums is paid by the
supervisors as salary deductions. NEC Tokin merely includes their dependents in the group
insurance package as an accommodation. In any case, any benefit that the supervisors
derive from this accommodation does not exceed the amount of P 1,500.00 per employee
per year. As discussed in the preceding section, such benefit, if any, is neither subject to
fringe benefit tax nor to income and withholding tax.
This ruling is being issued on the basis of the foregoing facts as represented. However, if
upon investigation, it will be disclosed that the facts are different, then this ruling shall
considered null and void.
055-99
Gentlemen :
This refers to your letter dated October 1, 1998 requesting for confirmation of your
opinion that the grant of housing privilege, which is beyond fifty (50) meters from the work
premises or the high voltage power generation plant, to the employees of ABB Power Inc.
is not subject to the Fringe Benefits Tax, for reasons of health and safety of its workers
provided the housing complex is within a reasonable distance from the work premises of
the employer. cdtai
The exemption of any fringe benefit from the fringe benefit tax imposed under the
aforementioned Section shall not be interpreted to mean exemption from any other
income tax imposed under the Code except if the same is likewise expressly exempt from
any other income tax imposed under the Code or under any other existing law. Thus, if the
fringe benefit is exempted from the fringe benefits tax, the same may, however, still form
part of the employee's gross compensation income which is subject to income tax, hence,
likewise subject to a withholding tax on compensation income payment. LibLex
Considering the exceptional circumstance of this case, it appearing that the 3 kilometer
distance was for purposes of complying with the state policies on the promotion of the
health and welfare of workers (Articles II, Sections 15 and 18 of the 1987 Constitution)
and the constitutional mandate guaranteeing full protection to labor (Art. 13, Sections 3
and 14, ibid.), this situation falls within the purview of Section 33 of the Tax Code of 1997.
Such being the case, the costs and related expenses associated with the lease of the
condominium unit and residential house for the benefit of your employees are expenses
directly attributable to the development, management, operation and/or conduct of your
business pursuant to Section 34(A)(1) of the Tax Code, the same shall be deducted from
the gross income of the company. As such, and considering that it is a fringe benefit for
the convenience and advantage of the employer, it shall not be included as part of
compensation income of the employee subject to withholding neither will it be subject to
the fringe benefit tax under Sec. 33 of the Tax Code of 1997 as implemented by Revenue
Regulation 3-98.
This ruling is being issued on the basis of the foregoing facts as represented. However, if
upon investigation, it will be disclosed that the facts are different, then this ruling shall be
considered null and void.
This refers to your letter dated July 31, 1996 explaining in detail the reasons why you
issued income tax assessment notices to Mr. Arcadio Montoya, an overseas contract
worker (OCW), for his failure to include in his income tax returns the equivalent money
value of his free housing benefits in the Kingdom of Saudi Arabia for the taxable year 1994.
cda
In reply, please be informed that relative to this, Section 2(2) of Revenue Regulations No. 6-
82, as amended by Revenue Regulations No. 16-86 provides as follows:
xxx xxx xxx
In other words, for taxation purposes, the general rule is that the monetary value of the
housing benefits to the employee shall be added to his remuneration for the purpose of
determining the gross compensation income, EXCEPT where the living quarters are
furnished to him for his employer's convenience. The question of when is the providing of
living quarters can be considered as for the employers convenience can be determined on
who will benefit more if living quarters are provided to an employee. In this instant case,
we are of the opinion that the benefit is more on the part of the employee rather than to
that of the employer because when an overseas contract worker applied and accepted an
employment contract abroad, he is aware that he will have to rent a house there. So that if
living quarters are provided to him, that would mean that he will not incur additional
expenses for his living quarters and therefore, savings on his part. As you have said, the
free accommodation furnished to Mr. Montoya is part of the non-monetary fringe benefits
granted to him as per the Employment Contract which is actually an incentive which forms
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part of his compensation and that it is provided not for the convenience of the employer
but as part of the compensation package of the OCW.
In view thereof, this Office hereby concurs with your opinion that the housing benefits
given to Mr. Montoya, an OCW in the Kingdom of Saudi Arabia, being part of his
compensation package, should form part of his remuneration which is subject to income
tax pursuant to Sec. 2(2) of Revenue Regulations No. 6-82, as amended by Revenue
Regulations No. 16-86. (BIR Ruling No. 596-88 dated December 23, 1988). cdtai
LIWAYWAY VINZONS-CHATO
Commissioner of Internal Revenue
RR 2-98 S.33-000-00-061-99
Petron Corporation
7901 Makati Avenue
1200 Makati City
Attention: Mr. Wilfrido A. Galoyo
Employee Relations Manager
Human Resource Management Division (HRMD)
Gentlemen :
This refers to your letters dated August 25 and 31, 1998 requesting for a ruling on the
taxability of the overtime meal allowance which is being furnished by you to your rank and
file employees pursuant to their Collective Bargaining Agreement (CBA) and to your
supervisory, professional and technical employees. cda
It is represented that employees who rendered overtime work for at least two (2) hours
are entitled to overtime meal allowances in the following amounts:
For rank and file employees:
P80.00 / P90.00 / P100.00
For supervisory, professional and technical employees:
P150.00
and that the overtime meal allowances are granted to employees who actually rendered
overtime work.
In reply, please informed that pursuant to Section 2.78.1 (A)(2) of Revenue Regulations No.
2-98 on Withholding of Income Tax on Compensation, where a person receives a salary as
remuneration for services rendered, and in addition thereto, living quarters or meals are
provided, the value to such person of the quarters and meals so furnished shall be added
to the remuneration paid for the purpose of determining the amount of compensation
subject to withholding. However, if living quarters or meals are furnished to an employee
for the convenience of the employer, the value thereof need not be included as part of
compensation income.
Furthermore, under Section 2.78.1 (A)(3) of Revenue Regulations No. 2-98, facilities and
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. LLpr
Such being the case, the overtime meal allowances of P80.00 / P90.00 / P100.00 given by
you to your rank and file employees, who have actually rendered overtime work, are not
considered as part of compensation subject withholding tax since the same are of
relatively small value.
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Likewise, the overtime meal allowance of One hundred fifty pesos (P150.00) given to your
supervisor, professional and technical employees are not considered as part of
compensation subject to withholding tax since such overtime meal allowance are
furnished to the employees for your convenience.
Moreover, the said overtime meal allowance granted to your rank and file employees and
to your supervisory, professional and technical employees are not subject to the fringe
benefits tax pursuant to Section 33 (C) of the Tax Code of 1997 as implemented by
Section 2.33 (C) of Revenue Regulations No. 3-98, pertinent provision of which is as
follows:
"SEC. 2.33. Special Treatment of Fringe Benefits.
"(A) . . .
"(B) . . .
"(C) Fringe Benefits Not Subject to Fringe Benefits Tax In general, the
benefits tax shall not be imposed on the following fringe benefits:
"(1) Fringe benefits which are authorized and exempted from income tax
under the Code or under any special law;
"(3) Benefits given to rank and file, whether granted under a collective
bargaining agreement or not;
"(4) De minimis benefits as defined in these Regulations;
"(5) If the grant of fringe benefits to the employee is required by the nature
of or necessary to the trade, business or profession of the employer;
or
"(6) If the grant of the benefit is for the convenience of the employer."
(Emphasis supplied)
In fine, the overtime meal allowance granted to the rank and file employees are not subject
to the fringe benefits tax as these are specifically exempted from the application thereof.
Likewise, the overtime meal allowances granted to the supervisory, professional and
technical employees are not subject to the fringe benefits tax since the same are granted
to the employees as required by the nature of, necessary to your trade, or business and for
your convenience. cda
This ruling is being issued on the basis of the foregoing facts as represented. However, if
upon investigation, it will be discovered that the facts are different, then this ruling shall be
considered null and void.
Gentlemen :
This refers to your letters dated January 10, 2007 and February 26, 2007
requesting on behalf of eTelecare Global Solutions, Inc. ("EGSI") for con rmation of
your opinion:
1) That the transportation, meal and mobile allowances being given across all
EGSI staff/of cer levels, are not subject to income tax either as compensation or fringe
benefits; and
2) That there is no substantiation requirement for the said transportation and
meal allowances.
As represented, EGSI (formerly, "e-Telecare International, Inc.") is a Philippine
domestic company registered under SEC Registration No. A200002674 issued on
February 21, 2000. The primary purpose of EGSI is to develop and operate a call center
business, which is de ned as the provision of customer relationship management
services (CRM) through various media including, but not limited to, telephone, facsimile,
e-mail, web chat and Voice-Over Internet (VOIP), and any and all allied or related
businesses.
The specific attributes of EGSI's operations are as follows:
1. The CRM services provided by EGSI include inbound customer services,
technical help desk and sales.
2. EGSI runs several programs for clients in a broad range of industries such as
technology, nancial services, travel, telecom and retail. Since commencing operations
in 2000, the company has established six (6) different centers in the Philippines
employing almost 5,000 Customer Service Agents.
3. The business is conducted on a 24-hour, 7-days-a-week basis with peak hours
from 9:00 p.m. to 9:00 a.m. which coincide with the day hours across the time zones in
the United States where all of EGSI's clients are located.
4. To enable it to ef ciently run its operations and consequently meet and exceed
clients' expectations, EGSI requires its employees to strictly adhere to their work
schedules. Speci cally, the employees are made to work at designated hours which are
considered night shift (i.e., between 10:00 p.m. to 6:00 a.m.) and are also required to
work overtime. The above work schedule is not only observed by operations personnel
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but even most personnel performing support functions such as human resources,
recruiting, nance and IT. Even those who are primarily assigned day schedules
intermittently report for night shift to meet the requirements of their positions.
5. To meet the requirements of their work and to likewise avoid the dangers of
public transportation during the off-peak hours, the employees utilize taxi services
going to and from work. This practice is not merely brought out of convenience but is in
fact encouraged by EGSI management as conveyed in periodic staff meetings.
6. In consonance with the demands of the work, EGSI provides its employees in
various positions and levels the following:
- Maximum transportation allowance of P3,000 per month to rank and file and
supervisory personnel in operations positions;
- Maximum transportation allowance of P1,500 per month to rank and file and
supervisory personnel in support positions;
- Meal allowance of P100 per day to supervisory personnel in both operations
and support positions; and
- Mobile phone allowance of P1,200 per month to managers and directors in
both operations and support positions.
7. EGSI grants a maximum transportation allowance in the amount of P3,000 or
around P136 per day. The maximum allowance may be adjusted in case the current rate
becomes insuf cient to serve its purpose. The transportation allowance being given by
EGSI to its rank and le and supervisory personnel performing operations and support
functions is pre-computed on a daily basis and are paid to the employee while on an
assignment or duty. It is being given to promote the efficiency and well being, as well as
the safety of its employees and is also necessary to enable these employees to come
to work on time without any untoward incident taking into account the prevailing
security situation in the country.
8. The meal allowance to supervisory personnel in both operations and support
positions are being granted for use by the said of cers during the times that they are
required to work overtime and would therefore incur meal expenses.
9. Finally, the mobile phone allowance are being granted to the managers and
directors considering that the same is required by the nature of their high-level position
since they are expected to be on call 24 hours a day. The same privilege will likewise be
granted to supervisors whose job descriptions likewise require access anytime of the
day.
In reply, please be informed as follows:
Transportation Allowance
Cash allowances given to employees as incentives are generally considered
compensation income subject to income tax and withholding tax pursuant to Section
2.78.1 of Revenue Regulations No. 2-98, as amended.
However, this Of ce ruled in BIR Ruling No. DA-350-04 dated June 25, 2004 that
". . . if the transportation allowance . . . given to your customer service
representatives and . . . to your coaches are provided for Parlance's and
Vocative's convenience and benefit, the said transportation allowance is not
subject to fringe benefits tax pursuant to Section 2.33(C) of Revenue
Regulations no. 3-98, as amended.
Moreover, transportation allowance is not subject to the fringe bene ts tax since
it is required by the nature of the business of EGSI and under the convenience of
employer rule pursuant to Section 33 (C) of the Tax Code of 1997 as implemented by
RR No. 3-98, viz:
"(C) Fringe Benefits Not Taxable under this Section. The following
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fringe benefits are not taxable under this Section:
(1) . . .
(2) . . .
(3) . . .
(4) . . .
(5) If the grant of fringe benefits to the employee is required by the nature
of, or necessary to the trade, business or profession of the employer; or
(6) If the grant of the fringe benefit is for the convenience of the
employer."
Meal Allowance
Section 2.78.1(a)(3) of Revenue Regulations (RR) No. 2-98, as amended by RR
No. 8-2000 and 10-2000 reads
"The following shall be considered as 'de minimis' benefits not subject to
INCOME TAX AS WELL AS withholding tax on compensation income of both
managerial and rank and file employees:
xxx xxx xxx
(j) Daily meal allowance for overtime work not exceeding twenty-five
percent (25%) of the basic minimum wage.
xxx xxx xxx"
This Of ce had occasion to rule in BIR Ruling No. 023-02 dated June 21, 2002
that the above regulations are illustrative and non-exclusive in the enumeration of what
constitutes de minimis fringe bene ts. The Commissioner held that although the meal
and food bene ts granted were not intended to be used for overtime work, they may
still be added in the above enumeration. However, in terms of de minimis threshold for
regular meal and food bene t, the ceiling for bene ts of similar nature under RR No. 8-
2000 should be used as guidelines. Such being the case, meal and food bene ts not
exceeding 25% of the daily minimum wage may be considered de minimis meal bene t
and therefore, tax exempt. The excess over this amount shall be considered "other
benefits" as contemplated under Section 32 (B) (7) (e) (iv) of the Tax Code of 1997. The
excess of the meal and food allowance given over the de minimis ceiling shall still be
exempt provided that it, together with the total amount of "other bene ts," shall not
exceed PhP30,000.
In one case, a call center providing technical support service with 24 hours
operation daily planned to provide its graveyard shift employees PhP100.00 meal
allowance for every night's work. This Office held
"In view of the foregoing, the PhP100.00 meal allowance given to your
graveyard shift employees which is not intended to be used for overtime work
may still be added in the enumeration of de minimis fringe benefits. The portion
of the meal allowance not exceeding 25% of the daily minimum wage may be
considered de minimis meal benefit, and therefore, tax exempt. The excess over
this amount shall be considered as "other benefits" as contemplated under Sec.
32(B)(7)(e)(iv) of the Tax Code of 1997. The excess of the meal allowance
given over the de minimis ceiling shall still be exempt provided that it, together
with the total amount of other benefits, shall not exceed PhP30,000 (BIR Ruling
No. DA-238-03 dated July 23, 2003)."
On the issue of whether the meal allowance is exempt from fringe bene ts tax,
Section 33 (C) of the Tax Code of 1997 provides viz:
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"(C) Fringe Benefits Not Taxable under this Section. The following
fringe benefits are not taxable under this Section:
(1) . . .
(2) . . .
(3) . . .
(4) De minimis benefits as defined in these Regulations;
(5) If the grant of fringe benefits to the employee is required by the nature
of, or necessary to the trade, business or profession of the employer; or
(6) If the grant of the fringe benefit is for the convenience of the
employer."
Accordingly, this Of ce holds that meal allowance being given across all EGSI
staff/of cer levels not exceeding 25% of their respective daily minimum wage may be
considered de minimis meal bene t pursuant to RR No. 8-2000 and 10-2000 and
therefore, tax exempt. The excess over this amount shall be considered "other bene ts"
as contemplated under Section 32(B)(7)(e)(iv) of the Tax Code of 1997. The excess of
the meal allowance given over the de minimis ceiling shall still be exempt provided that
it, together with the total amount of other bene ts, shall not exceed PhP30,000 when
added to the 13th month pay. If the employer pays more than the ceiling prescribed by
the Regulations, the excess shall be taxable to the employee receiving the bene ts only
if such excess is beyond the PhP30,000 ceiling (cited in BIR Ruling No. 001-2007 dated
January 20, 2007). The said meal allowance is not subject to fringe bene ts tax since it
is speci cally exempted from the application thereof pursuant to Section 33(C)(4), (5)
and (6) of RR 3-98 implementing Section 33(C) of the Tax Code. (BIR Ruling No. 61-99
dated May 5, 1999). Neither is it subject to substantiation requirement. DISaEA
Mobile Allowance
As stated earlier, cash allowances given to employees as incentives are generally
considered compensation income subject to income tax and withholding tax pursuant
to Section 2.78.1 of RR No. 2-98, as amended.
However, in one case, a company operating a power plant was compelled to
provide housing facility to ensure 24-hour access to skilled workers as power failure
and trouble shooting may be required at any time of the day. This Of ce has ruled in the
said case that
". . . fringe benefits means any goods, service or other benefit furnished
or granted by an employer in cash or in kind, in addition to basic salaries, to an
employee (except rank and file employee) such as housing. Section 33(a) of the
Tax Code of 1997 stipulates that fringe benefits which are 'required by the
nature of, or necessary to the trade, business or profession of the employer, or
when the fringe benefit is for the convenience or advantage of the employer' are
not subject to the fringe benefit tax. If the living quarters are furnished to an
employee for the convenience of the employer, the value thereof need not be
included as part of compensation income subject to withholding. . . .
xxx xxx xxx
. . . considering that it is a fringe benefit for the convenience and
advantage of the employer, it shall not be included as part of compensation
income of the employee subject to withholding neither will it be subject to the
fringe benefits tax under Sec. 33 of the Tax Code of 1997 as implemented by
Revenue Regulations No. 3-98." (BIR Ruling No. 055-99 dated April 23, 1999)
DA023-06
Gentlemen :
This refers to your letter dated October 11, 2007 stating that Metrobank Card
Corporation (MCC) is a corporation organized and existing under and by virtue of the
laws of the Philippines; that MCC is engaged in the business of issuing credit cards to
the general public; that to promote the ef ciency of its employees in order for MCC to
deliver the desired services to its credit cardholders, there are some units of MCC
requiring 24/7 operation; that to man this operational set-up, certain personnel,
amongst them, customer service agents (CSAs) and fraud personnel and some
backroom employees of MCC are made to work at designated hours, including night
time; that in some instances, these employees may have to work overtime even after
their shift ends; that MCC, in recognition of the added risk that its employees take on to
commute to and from work during the graveyard/night shift as well as those who
extend their working hours during weekdays, weekends, or during holidays, provides
them with Overtime/Transportation Allowance of and a Duty Allowance on
Night/Graveyard Shift, to wit: cACEHI
i) Rank-and-File:
Daily local allowance of P300.00 given when the employee is assigned outside of
Metro Manila
Daily foreign allowance of USD50.00 for Europe and Japan; USD40.00 for the USA and
Asian countries
ii) Officers:
President P1,000.00/day
AVP up P800.00/day
Managers P600.00/day
Foreign Trip
President USD120-150/day
FVP USD95-105/day
VP USD90-100/day
AVP USD75-85/day
Managers USD65-75/day
Based on the foregoing representations, you now request for confirmation of your opinion
that the above-mentioned benefits for the convenience and benefits of MCC, if required by
the nature of, or necessary to the trade or business of MCC, are not subject to the fringe
benefit tax pursuant to Section 2.33 (C) of Revenue Regulations No. 3-98, as amended; and
that since the aforesaid benefits are pre-computed on a daily basis and are paid to the
employees while they are on assignment or duty, they are not subject to the requirements
of substantiation and to any withholding tax pursuant to Revenue Regulations No. 2-98, as
amended. ASDCaI
In reply thereto, please be informed that Section 2.33 (C) of Revenue Regulations No. 3-98,
as amended, provides
"(C) Fringe Benefits Not Subject to Fringe Benefit Tax. In general, the fringe
benefits tax shall not be imposed on the following fringe benefits:
(5) If the grant of fringe benefits to the employee is required by the nature of, or
necessary to the trade, business or profession of the employer; or
Corollarily, Section 2.78.1 (A) (6) (b) of Revenue Regulations No. 8-2000 provides that
"(6) Fixed or variable transportation, representation and other allowances.
In stressing the rationale of the above-mentioned principles, this Office elucidated on the
matter in BIR Ruling No. DA350-04 dated June 25, 2004, as follows: CEaDAc
The above-cited ruling was later reiterated in BIR Ruling No. DA-023-06 dated January 27,
2006, where it was held that
"If the Outstation Allowance is clearly required by the nature of or necessary to the
trade or business of the employer, the grant of such Outstation Allowance is not
subject to the fringe benefits tax prescribed in Section 33(A) of the said Code.
Consequently, the Outstation Allowance, not being part of the compensation
income of the employee, is not subject to income tax and consequently to
withholding tax. By the same token, the Outstation Allowance which may be
incurred or expected to be incurred by the aforesaid employee in the performance
of his duties cannot be considered as part of compensation subject to
withholding tax even if the employee fails to account/liquidate the same
CD Technologies Asia, Inc. 2016 cdasiaonline.com
considering that said expense is pre-computed on a daily basis and is paid to an
employee while he is on an assignment or duty." HDTcEI
IN VIEW OF THE FOREGOING, this Office hereby confirms your opinion that the above-
mentioned benefits which are for the convenience of MCC and are required by the nature
of, or necessary to the trade or business of MCC are not subject to the fringe benefits tax
pursuant to Section 2.33 (C) of Revenue Regulations No. 3-98, as amended. Moreover,
since the said benefits are pre-computed on a daily basis and are paid to the employees,
while they are on assignment or duty, they are not subject to the requirements of
substantiation and therefore not subject to income tax and to withholding tax.
This ruling is being issued on the basis of the foregoing facts as represented. However, if
upon investigation, it will be disclosed that the facts are different, then this ruling shall be
considered null and void. CcADHI