Bir Ruling Da 013 08

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Copyright 2015 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia 2014 1

January 16, 2008

BIR RULING [DA-013-08]

DA023-06

Metrobank Card Corporation

6778 Ayala Avenue

Makati City

Attention:Atty. Aileen Paulette Saavedra-De Jesus

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 efficiency 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 somebackroom 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

(a) Transportation Allowance are granted as follows:

Officer: P200.00/day on a weekday after 9 pm

P250.00/day on a weekend

P300.00/day on holidays

Rank-and-File P100.00/day on a weekday after 9 pm

P200.00/day after midnight

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P100.00/day on a weekend/rest day provided

employee rendered 4 hours of work and

P200.00/day if 8 hours

P250.00/day on a holiday for 8 hours work and

P150.00 for 4 hours if work is rendered on a holiday

(b) The Night Shift Allowance are as follows:

Officer: P300.00/day

Rank-and-file: After 9 pm P500.00 on a weekday and

P100.00 on a weekend or holiday

After midnight P100.00 on a weekday and

P150.00 on a weekend or holiday

that MCC believes that these allowances are meant not only to promote the efficiencyand well being, as well as the safety of its employees, but are also necessary to enable

these employees to come to work on time without any untoward incident taking into

account the lateness of the hour and the prevailing security situation in the country;

that in the conduct of its card business, it is necessary for MCC to promote and

maintain good relations with merchants and retail establishments relative to its card

acquiring business; that accordingly, MCC sends its employees to regularly visit

merchants in different parts of Metro Manila or the country, to check whether the

Point-of-Sale terminal/equipment they are using are in top condition, and to handle

other concerns; that MCC likewise attends to the needs of the direct sales

agencies/agents who promote its card products; that the employees assigned toconduct fieldwork for purposes of discharging their function are entitled to a meal

allowance on fieldwork of P100/day or P110.00/day within and outside of Metro

Manila, respectively; and that the employees who are sent to locations beyond Metro

Manila for purposes of carrying the business operations of MCC are entitled to an

Outstation or Out-of-Town Allowance as follows: ACIDSc

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:

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President P1,000.00/day

AVP up P800.00/day

Managers P600.00/day

Foreign TripPresident 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 RevenueRegulations 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:

xxx xxx xxx

(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 fringe benefits to the employee is for the convenience

of the employer." DCcSHE

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.

xxx xxx xxx

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(b) Any amount paid specifically, either as advances or reimbursements for

traveling, representation and other bona fide ordinary and necessary

expenses incurred or reasonably expected to be incurred by the

employee in the performance of his duties are not compensation subject

to withholding, if the following conditions are satisfied:

(i) It is paid for ordinary and necessary traveling and

representation or entertainment expenses paid or

incurred by the employee in the pursuit of the trade,

business or profession; and

(ii) The employee is required to account/liquidate for the

foregoing expenses in accordance with the specific

requirements of substantiation for each category of

expenses pursuant to Section 34 of the Code. The

excess of actual expenses over advances made shall

constitute taxable income if such amount is not required

to the employer. Reasonable amounts of

reimbursements/advances for traveling and

entertainment expenses which are pre-computed on a

daily basis and are paid to an employee while he is on an

assignment or duty need not be subject to the

requirements of substantiation and to withholding."

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, asfollows: CEaDAc

"Transportation allowance being given by your subsidiaries, Parlance

Systems, Inc. and Vocative Systems, Inc. to its customer service representatives

are not compensation subject to income tax and consequently to withholding tax

on wages in accordance with Revenue Regulations No. 2-98, as amended.

Moreover, since the transportation allowance is pre-computed on a daily basis

and are paid to the employee while on an assignment or duty, the said

transportation allowance is not subject to the requirements of substantiation and

to withholding pursuant to Revenue Regulations No. 2-98, as amended."

The above-cited ruling was later reiterated inBIR 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

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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 inthe 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 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 basisand 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

Very truly yours,

(SGD.) JAMES H. ROLDAN

Assistant Commissioner

Legal Service

Bureau of Internal Revenue

Documents

Bir Ruling Da 013 08