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Business Law Practice Noel | PangcogAtty. Jose Cochingyan III AY 2011-2012

MODULE 1: HUMAN RESOURCE ISSUES ON COMPENSATION

1. LABOR STANDARDS1.1 General Principles on Wages

1.1.1 Non-diminution of Benets:

LC ART. 100Prohibition against elimination or diminution of benets. Nothing in this Book shall be construed toeliminate or in any way diminish supplements or other employee bene!ts being en"oyed at the time o# promulgation o# this Code.

LC ART. 1$%Non-diminution of benets. No wage order issuedby any regional board shall pro&ide #or wage rateslower than the statutory minimum wage rates

prescribed by Congress.

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1.1.1.1Company 'ractice or (&ersight)

Globe Mackay Cable & Rado Co!" # NLRCFacts:

• Respondents are employees of Petitioner

• Wage rder ! " #as enacted cto$er 1%&' to increase t(ecost of li)ing allo#ance *+, for non-agricultural pri)atesector $y P/.00day.

• Petitioners computed t(is on t(e $asis of 22 #or3ingdaysmont(.

• Respondent countered t(at it s(ould $e /0 daysmont( as(as $een company practice4 #(ic(5 according to t(ems(ould not $e unilaterally #it(dra#n

• ,a$or r$iter ruled in fa)or of Petitioner

• N,R+ re)ersed , decision

6ssue: WN t(e pre)ious /0daysmont( can $e considered companypractice 7 as suc(5 cannot $e unilaterally #it(dra#n8

9eld: No company practice. N,R+ re)ersed.

No proof #as presented t(at t(ere (as $een a long companypractice of /0daymont( computation of +,. o $econsidered as suc(5 t(ere must $e proof t(at aside from$eing practiced o)er a long period of time5 it must also $e

consistent and deli$erate.

9o#e)er5 $ased on Wage rders ! 25 /5 ; 7 "5 t(e +, iscomputed $ased on t(e computation of t(e days t(ey arepaid t(eir $asic #age5 e)en if un#or3ed. ccording to t(eir+B5 t(e $asic #age is computed $ased on 22 daysmont(or ; days#ee3. s t(e +B is la# $et#een t(e parties5 t(ismust $e follo#ed. <(ould t(e respondents (a)e felt t(at t(is#as a diminution of $enets5 t(ey s(ould (a)e soug(t to re-negotiate said +B.

6n addition5 t(e pre)ious Wage rder ! ' lac3ed

administrati)e guidelines. But #(en t(e implementing rules#ere released5 t(e computation for t(e con)ersion of dailyallo#ance #as included5 #(ic( specied a 22 daymont($asis. (us5 since t(e company (as $een practicing anerroneous application of t(e la#5 and as it (as $een $asissuc( errors on t(e a$sence of clear administrati)eguidelines for Wage rder ! "5 it cannot $e faulted for suc(.nd as a past error is actually $eing corrected5 respondentscannot $e said to (a)e a )ested rig(t on t(e $enets of anerroneous application of t(e la#.

Ma$la Elec%!c Co # '(')b$*

Facts:• (is is a petition for certiorari of =>R,+ see3ing to annul

t(e orders of <,> re?uiring =>R,+ and its ran3 and leunion *=>W to execute a collecti)e $argaining agreement*+B for t(e remainder of t(e parties@ 1%%2-1%%A +Bcycle5 and to incorporate in t(is ne# +B t(e <ecretary@sdispositions on t(e disputed economic and non-economicissues #(ic( includes:

1 Wage increases of P25200.00 for 1%%" and P25200.00 for1%%A4

2 (e follo#ing economic $enets:

1




a. #o mont(s +(ristmas $onus4$. Rice <u$sidy and retirement $enets for retirees4c. ,oan for t(e employees@ cooperati)e4d. <ocial $enets suc( as G9<6P and 9=P for

dependents5 employees@ cooperati)e and (ousing

e?uity assistance loan4e. <igning $onus4f. 6ntegration of t(e Red +ircle Rate llo#anceg. <ic3 lea)e reser)e of 1; days(. (e '0-day union lea)e4i. 9ig( pole(ig( )oltage and to#ing allo#ance4 and . Benets for collectors

/ >xercising discretion in determining t(e retroacti)ity of t(e +B4

6ssue: WN t(e <,> committed GC,>D in (is rders8

9>,C: E><. (e <+ found t(at t(e <,> committed GC,>D incertain aspects of (is rders.

(e issue (er related to +ompany Practice is on t(e =<BN<.

=>R,+ argued t(at t(e <,> erred #(en (e recogniHedt(at t(ere #as an Iesta$lis(ed practiceJ of gi)ing a t#o-mont( +(ristmas $onus $ased on t(e fact t(at $onuses#ere gi)en on or a$out +(ristmas time. 6t pointed out t(att(e Iesta$lis(ed practiceJ attri$uted to =>R,+ #asneit(er for a considera$le period of time nor identical in

eit(er amount or purpose.

s a rule5 a $onus is not a demanda$le and enforcea$leo$ligation4 it may ne)ert(eless $e granted on e?uita$leconsideration as #(en t(e gi)ing of suc( $onus (as $eent(e company@s long and regular practice. o $e considered aIregular practice5J t(e gi)ing of t(e $onus s(ould (a)e $eendone o)er a long period of time5 and must $e s(o#n to (a)e$een consistent and deli$erate. (us #e (a)e ruled inNational <ugar Reneries +orporation )s. N,R+:

I(e test or rationale of t(is rule on long practice re?uiresan indu$ita$le s(o#ing t(at t(e employer agreed tocontinue gi)ing t(e $enets 3no#ing fully #ell t(at saidemployees are not co)ered $y t(e la# re?uiring paymentt(ereof.J

(e record s(o#s t(at =>R,+5 aside from complying #it(t(e regular 1/t( mont( $onus5 (as furt(er $een gi)ing itsemployees an additional +(ristmas $onus at t(e tail-end of t(e year since 1%&&. W(ile t(e special $onuses diKered inamount and $ore diKerent titles5 it cannot $e denied t(att(ese #ere gi)en )oluntarily and continuously on or a$out+(ristmas time. (e considera$le lengt( of time =>R,+(as $een gi)ing t(e special grants to its employeesindicates a unilateral and )oluntary act on its part5 tocontinue gi)ing said $enets 3no#ing t(at suc( act #as notre?uired $y la#. company practice fa)ora$le to t(e

employees (as $een esta$lis(ed and t(e payments made $y=>R,+ pursuant t(ereto ripened into $enets enoyed $yt(e employees. +onse?uently5 t(e gi)ing of t(e special$onus can no longer $e #it(dra#n $y t(e company as t(is#ould amount to a diminution of t(e employee@s existing$enets.<+5 (o#e)er5 denied t(e <,>@s a#ard of a t#o-mont(special +(ristmas $onus since t(ere #as no recogniHedcompany practice of gi)ing a t#o-mont( special grant. #o-mont( special $onus #as gi)en only in 1%%; in recognitionof t(e employees@ prompt and eLcient response during t(ecalamities *nla$oM.

Na%o$al +ede!a%o$ o, Labo! # CAFacts:

• Respondent R+6 is t(e o#ner of a ru$$er plantation

• Respondent entered into a Farm =anagement greement*F= #it( <CP6

• Petitioner NF, is t(e $argaining agent of <CP6 employees int(e ,atuan Plant

• +B states t(at in case of permanent and temporary lay-oK5t(e employees are entitled to separation pay

• +ompre(ensi)e grarian Reform ,a# *+R, too3 eKect in

1%&& stating t(at all lands of pu$lic domain leased or2




possessed $y non-go)ernment entities5 de)oted toagricultural industries must $e ac?uired and distri$utedafter 10 years from t(e eKecti)ity of t(e +R,5 or upon t(eexpiration of t(e contract5 #(ic(e)er is sooner.

• <CP6 did not rene# t(e F= #it( R+6

• Petitioners recei)ed separation pay e?ui)alent to mont(year of ser)ice5 despite <CP6 paying t(e e?ui)alent of 1 mont( salaryyear of ser)ice to employees t(at #ere laidoK in t(e past.

• Petitioners@ $enets #ere also lumped into one c(ec35despite its pre)ious re?uest to segregate t(e regular$enets from t(e separation pay

• Petitioners #ere also re?uired to sign a IRelease andOuitclaimJ upon receipt of t(e c(ec3s

• ,a$or r$iter ruled t(at t(e termination #as proper- +losure of <CP6 #as due to +R,

- +B stated t(at separation pay #ould $e $ased on a mont(year of ser)ice- Petitioners already signed t(e ?uitclaim5 #(ic( #as

e?ui)alent to a #ai)er of future complaints regarding t(eseparation pay

• N,R+ aLrmed ,

6ssue: WN t(ere #as a diminution of $enets $ased on allegedcompany practice of paying t(e e?ui)alent of 1 mont(salaryyear of ser)ice8

9eld: No diminution of $enets. mont( salaryyear computation

up(eld.

rt. 2&/ of t(e ,a$or +ode pro)ides t(at employees #(o#ere dismissed not due to closure of t(e $usiness5 $ut notdue to insol)ency s(ould recei)e t(e e?ui)alent of 1 mont(salary or mont( salaryyear of ser)ice5 #it( " mont(s$eing counted as 1 year.

s t(e closure of t(e $usiness #as done in good fait( due tot(e eKecti)ity of t(e +R,5 and $ecause of t(e silence of t(e+B as to t(e met(od of computing t(e separation pay5 t(e,a$or +ode pro)ision s(all go)ern.

(ere #as also no company practice )iolated despite <CP6granting separation pay of 1 mont(year of ser)ice toretrenc(ed employees $efore t(e closure of t(e $usiness$ecause:

1. No pro)ision in t(e +B xing t(e separation pay of

t(ose terminated for aut(oriHed causes2. >mployees #(o #ere terminated prior to t(e closure

of t(e $usiness #ere due to redundancy5 and assuc(5 #ere actually entitled to separation pay of 1mont( salaryyear of ser)ice pursuant to t(e ,a$or+ode.

Se#lla T!ad$* Co # Se)a$aFacts:

• Petitioner is <e)illa rading +o

• Respondent is t(e union for employees of Petitioner

• For 2-/ years prior to 1%%%5 petitioner (as $een computing1/t( mont( salary $ased on t(e $asic pay P,< ot(er$enets5 suc( as o)ertime5 maternity 7 paternity lea)e5(oliday pay5 )acation 7 sic3 lea)e5 etc.

• Petitioner left t(e computation of t(e 1/ t( mont( pay to itspayroll employees. 9o#e)er5 after c(anging t(e person inc(arge of payroll and upon audit5 t(ey disco)ered t(e errorof including non-$asic pay in t(e gures it used for t(ecomputation of t(e 1/t( mont( pay.

• Based on t(e 1/t( mont( pay la#5 it s(all $e computed usingt(e net $asic pay as $ase5 excluding ot(er $enets.

• Respondents ?uestioned t(e recalculation of t(e 1/t( mont(

pay as $eing )iolati)e of t(e non-diminution of $enetspursuant to t(e ,a$or +ode.

• oluntary r$itrator ruled in fa)or of respondents

6ssue: WN t(ere #as a )iolation of t(e non-diminution pro)ision int(e recalculation of t(e 1/t( mont( pay8

9eld: Ees. Petitioner must re)ert $ac3 to t(e old computation of t(e 1/t( mont( pay and include ot(er $enets in t(e $ase.

lt(oug( petitioner claims t(at it is merely correcting amista3e5 t(is is not suLcient to ustify t(e diminution of

$enets it pre)iously pro)ided. Petitioner failed to explain




#(y mista3es #ere made in t(e computation despite clarityin statute 7 urisprudence.

Petitioner@s contention t(at t(is is t(e same case as Glo$e=ac3ay5 #(erein t(e +ourt ruled in fa)or of correcting t(e

mista3e of t(e company5 is #rong. 6n Gl$oe =ac3ay@s case5t(ey #ere not guilty of unilaterally #it(dra#ing #(at #asallegedly considered as long company practice5 $ecause it#as actually not long company practice. Glo$e =ac3ayt(oug(t t(at t(ey #ere supposed to compute t(e +,$ased on a /0daymont( $asis due to an a$sence inimplementing rules.

6n t(is case5 (o#e)er5 t(e Petitioners 3ne# fully #ell t(att(ey #ere computing t(e 1/t( mont( pay $y including ot(er$enets in its $ase. Cespite t(e presence of claricatory urisprudence and implementing rules5 Petitioner still

included ot(er $enets in computing t(e 1/ t( mont( pay. 6naddition5 it can also $e considered long company practicet(at cannot $e unilaterally #it(dra#n $ecause t(is (as $eent(e practice of t(e company for at least 2 years. (us5petitioner must re)ert $ac3 to its old computation of 1/ t(

mont( pay $y including ot(er $enets in computing its $ase.

TSPIC Co!" # TSPIC E)"loyee( U$o$Facts:

• Petitioner designs5 manufactures 7 mar3ets integrati)ecircuits for data processing industries

• Respondent is t(e $argaining agent of r7f employees of Petitioner

• +B for 2000-200' included a pro)ision on yearly salaryincrease from Dan 2000-Dan 2002. *10Q in 20005 12Q in20015 11Q in 2002 nd any su$se?uent Wage <alary6ncrease rder *after Wage rder ! A s(all $e deemedincluded in t(e 12Q 7 11Q salary increase granted for t(e2001 7 20025 respecti)ely.

• +B also pro)ided t(at a proportionate increase s(all $egranted to t(ose #(o attain regular employment status int(e middle of t(e year and after t(e eKecti)ity of t(eincrease. *100Q for 1st O5 A;Q for 2nd O5 ;0Q for /rd O5 2;Q

for 't(

O

• Wage rder ! & #as implemented on cto$er 20005 raisingt(e daily minimum #age from P22/.; to P2;05 eKecti)eNo)em$er 2000.

• 6n 20015 some employees #ere informed t(at t(ey #ereo)erpaid 7 t(at t(eir o)erpayment #ill $e deducted fromt(eir salaries in a staggered $asis.

• Respondents a)erred t(at t(is #as a )iolation of t(e non-diminution of $enets pro)ision of t(e ,+

• oluntary r$itrator ruled in fa)or of Respondents

• + aLrmed @s ruling

6ssue: WN Petitioner@s decision to deduct o)erpayment from t(esalaries constituted a )iolation of t(e non-diminution of $enets pro)ided in t(e ,+8

9eld: No. (ere #as no )iolation of t(e non-diminution pro)ision.

Pursuant to t(e +B5 #(ic( is la# $et#een t(e parties5Petitioner granted t(e salary increase for 2001 7 2002. (is#as t(e general pro)ision in t(e +B. 9o#e)er5 t(ere #as aspecial pro)ision follo#ing suc(5 #(ic( stated t(at anysu$se?uent increase mandated $y a Wage rdersu$se?uent to Wage rder ! A s(all $e deemed credited orincluded in t(e salary increase for said years.

(us5 t(e #age increase granted $y Wage rder ! & s(ould$e credited against or su$tracted from t(e 12Q salaryincrease supposedly granted in 2001. (e diKerence is t(e

one5 #(ic( s(ould rig(tly $e considered as t(e increase in2001.

Ciminution of $enets is dened as:1. (e grant is founded on a policy t(at (as ripened into

practice for a long period of time2. Practice is consistent and deli$erate/. Practice is not due to error in interpretation of

dou$tful ?uestion of la#'. Ciminution is done unilaterally $y employer

Petitioner pro)ed t(at t(e o)erpayment #as done as a result

of an error5 #(ic( #as immediately rectied $y Petitioner.!




<ince it is a past error t(at #as committed5 t(ere can $e no)ested rig(t nor any diminution in $enet.

ARCO Me%al # Sa)a-a$ $* )*a Ma$**a*aaFacts:

• 6n Cecem$er 200/5 petitioner paid / employees a proratede?ui)alent for 1/t( mont( pay5 $onus 7 lea)e $enets5 assaid employees (a)e not rendered ser)ice for a full year.

• Respondents contend t(at se)eral times in t(e past5petitioner did not prorate t(e $enets gi)en to employees#(o #ere also not a$le to ser)e for a full year $y Cecem$er.

• oluntary ar$itrator found in fa)or of petitioner5 stating t(att(e past gi)ing of full $enets #ere mere errors.

• +B also stated t(at in order to $e entitled to full $enets5t(e employee must (a)e rendered one year of ser)ice.

• + ruled in fa)or of respondents saying t(at t(e past errors

already constituted )oluntary practice of t(e company inpaying t(e full $enets regardless of #(et(er or not t(eemployee rendered a full year of ser)ice.

6ssue: WN t(e payment of full $enets $y Petitioner in t(e pastregardless of actual ser)ice rendered constitutes )oluntaryemployer practice8

9eld: Ees. Payment of full $enets in t(e past s(all $e considered)oluntary employer practice.

Petitioner #as correct in stating t(at t(e +B clearly

pro)ides t(at in order for t(e employee to $e entitled to full$enets5 (e must rst (a)e rendered at least one year inser)ice. 9o#e)er5 it faltered in stating t(at t(e errorscommitted in paying out t(e full $enets in t(e past #eremerely Iclear o)ersig(tsSJ.

For se)eral years5 petitioner )oluntarily and freely paid outfull $enets regardless of t(e lengt( of ser)ice rendered.lt(oug( urisprudence is replete in determining t(e num$erof years it must $e exercised to constitute long employerpractice5 petitioner can no longer claim t(at it #as an error5as t(is practice (as $een done at least A times in t(e past.

Petitioner s(ould (a)e presented e)idence s(o#ing t(at full

$enets #ere not granted in t(e past to t(ose #(o did notrender a full year of ser)ice5 insteadof ust s(o#ing anaLda)it from t(e (ead of t(e manufacturing department.

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1.1.1.2Trans#er to Another 'osition

No!k( T!ad$* # G$loFacts:

• Respondent #as an employee of Petitioner5 $ut #assu$se?uently assigned to its sister company as +redit and+ollection =anager in ,egaspi.

• W(en an audit #as conducted5 it #as found t(at t(ecollection reports #ere padded $y s(o#ing a more fa)ora$lecollection eLciency t(an #(at it actually #as.

• Respondent #as c(arged #it( negligence of duties5 as (efailed to c(ec3 t(e reports $efore su$mitting t(e same totop management.

• Petitioner suspended respondent #it(out pay and $enetsfor 1; days.

• Respondent appealed (is suspension and re?uested t(at (e$e assigned as <ales >ngineer or to any positioncommensurate to (is ?ualications. 9o#e)er5 petitioner@s<P appointed (im as =ar3eting ssistant5 #(ic(respondent agreed to.

• But respondent led a complaint for illegal suspension5constructi)e dismissal 7 non-payment of $enets.

• , ruled in fa)or of Petitioner• N,R+ re)ersed

6ssue: WN respondent@s transfer of position constitutesconstructi)e dismissal8

9eld: Ees. Respondent@s transfer of position #as e?ui)alent to aconstructi)e dismissal.

+onstructi)e dismissal is dened as ?uitting $ecausecontinued employment is rendered impossi$le orunreasona$le5 as #(en t(ere is a demotion in ran3 ordiminution in pay or $enets.

"




lt(oug( respondent@s salary #as not reduced5 t(ere #as areduction in duties and responsi$ilities5 #(ic( amounted todemotion tantamount to constructi)e dismissal. 6n addition5(is $enets #ere reduced #(en t(e ser)ice car #as no

longer a)aila$le to (im as a =ar3eting ssistant.

R'!al Ba$k o, Ca$%la$ # /'l#eFacts:

• Petitioner appointed respondent as Planning and =ar3etingLcer.

• Petitioner@s president su$se?uently issued a memoranduma$olis(ing t(e position of planning and mar3eting oLcer5pursuant to its Personnel <treamlining Program.

• Petitioner transferred respondent to a $oo33eeper position#it( no diminution in salary.

•

Respondent #it(dre# (is agreement to t(e ne#appointment.• Petitioner t(en also assigned (im as ssistant $ranc( (ead5

#(ic( respondent still failed to accept.• Respondent led a complaint for constructi)e dismissal.

• ,a$or r$iter ruled in fa)or of respondent

• N,R+ re)ersed ,

• + re)ersed N,R+ and reinstated , ruling

6ssue: WN respondent #as constructi)ely dismissed8

9eld: No. Respondent #as not constructi)ely dismissed.

Respondent@s ne# position as $oo33eeper and assistant$ranc( (ead entailed great responsi$ilities5 as t(is ise?ui)alent to $eing t(e (ead of t(e accounting departmentof a $ranc(. 6n addition5 (e did not recei)e a diminution inpay.

(e transfer of respondent #as pursuant to a )alidPersonnel <treamlining Program5 #(ic( not only aKected(im alone5 $ut also ot(ers in (is position. lso5 despiterespondent@s refusal to accept t(e ne# appointment5petitioners did not dismiss (im5 as it #as respondent #(o5

(imself5 opted to terminate (is o#n employment #(en (epurposely failed to report for #or3.

P-l""$e A)e!ca$ L,e # G!a)a0eFacts:

• Respondent #as (ired as ssistant P 7 9ead of PensionsCept5 and concurrently as rust Lcer of P(ilam <a)ingsBan3.

• Respondent@s employees in (er department #eresu$se?uently transferred and #ere not replaced promptingrespondent to run t(e entire department on (er o#n.

• Respondent a)ailed of car and (ousing $enets in 1%%&.

• Petitioners5 (o#e)er5 oKered (er P2;05000 to )acate (eroLce instead5 #(ic( respondent refused5 as t(ere #as no)alid reason for (er to lea)e.

• 6n Cecem$er 1%%&5 Petitioner@s c(airman of t(e $oard met

#it( respondent reiterating t(eir re?uest for (er to )acate(er oLce5 #(ic( respondent still denied.• Petitioners transferred (er to t(e ,egal Cepartment a fe#

days after.• Petitioners immediately appointed a replacement for (er

pre)ious position as (ead of pensions department.• Curing +(ristmas season5 respondent soug(t t(e annual

gifts from P(ilam to its employees5 $ut s(e realiHed t(at s(e#as not e)en on t(e company@s list of employees.

• Respondent t(en led a complaint for illegal or constructi)edismissal.

• , ruled in fa)or of Petitioners.

• N,R+ aLrmed ,

• + re)ersed N,R+


9eld: Ees. Respondent #as constructi)ely dismissed.

lt(oug( t(e transfer of positions may $e a managementprerogati)e5 t(is s(ould still $e done in accordance #it( t(elimits set $y la#.

#




(e transfer of respondent #as actually met #it( $ad fait(or discrimination5 as it #as s(o#n t(at t(e position #asalready ad)ertised as )acant #ay $efore petitionertransferred (er to t(e ,egal Cepartment. lso5 despiterespondent meeting t(e standards for (er department set

$y Petitioner5 petitioner still c(ose to transfer (er to t(e,egal Cepartment5 #(ic( negates petitioner@s reasoning t(att(e transfer #as due to respondent@s failure to meet t(ecompany@s standards. Plus5 (er transfer #as unreasona$leand incon)enient5 as s(e (as not ade?uate exposure in t(eeld of litigation. 6n addition5 respondent #as left to run t(eentire Pensions Cepartment on (er o#n5 as petitioners failedto eld employees after transferring t(em to ot(erdepartments. ,astly5 petitioners failed to reply torespondent@s reection letter in response to t(eir P2;05000oKer for (er to )acate t(e position as (ead of t(e PensionsCepartment.

(ere $eing an o$)ious case of discrimination5 respondent(ad no c(oice $ut to forego (er continued employment #it(t(e company5 as $eing e?ui)alent to constructi)e dismissal.

Me$doa # R'!al Ba$k o, L'cba$Facts:

• Respondent Board of Cirectors released a resolution statingt(at t(ere #ill $e a res(uTing of t(e $an3@s employees tofamiliariHe t(em #it( )arious p(ases of $an3 operations 7 tostrengt(en t(e internal control system.

• Pursuant to said res(uTing5 petitioner #as transferred fromppraiser to +ler3-=eralco +ollection.

• Petitioner sent a letter to respondent5 stating (is disdain int(e transfer5 furt(er a)erring t(at (is transfer #as due tointrigues caused $y t(e malicious mac(inations of respondent@s +(airman@s good friend.

• Respondent merely reminded Petitioner t(at t(e transfer#as done in order to strengt(en t(e internal control systemof t(e $an3

• Petitioner re?uested for a lea)e of a$sence5 #(ic( (e usedto le a complaint for illegal dismissal and underpayment.

• , ruled in fa)or of petitioner

• N,R+ re)ersed

• + aLrmed N,R+

6ssue: WN petitioner #as constructi)ely dismissed8

9eld: No. Petitioner #as not constructi)ely dismissed.

+onstructi)e dismissal is an in)oluntary resignation resortedto #(en continued employment us rendered unreasona$leor impossi$le5 #(en t(ere is diminution in ran3 or pay5 or#(en clear discrimination $ecomes un$eara$le to t(eemployee. None of t(ese #ere present in petitioner@s case.

(ere #as a )alid reason for petitioner@s transfer5 as #asreiterated $y respondent. Respondent #as t(en a$le too)ercome t(e $urden t(at petitioner@s dismissal #asunla#ful.

x------------------------------------x

1.1.1./*emotion

Leo$a!do # NLRCFacts:

• Petitioner Fuerte #as (ired $y Pri)ate respondent Reynaldo=ar3eting +orp as a muTer specialist5 and #assu$se?uently promoted to super)isor.

• Petitioner ,eonardo #as also (ired $y respondent asmec(anic.

• Fuerte alleged t(at respondent e)entually transferred (im to

t(e <ucat plant for failure to meet t(e sales ?uota5 #(ile,eonardo #as dismissed $y respondent.• Bot( led a complaint for illegal termination

• , ruled in fa)or of petitioners

• N,R+ re)ersed ,

6ssue: WN petitioners #ere illegally dismissed8

9eld: No. (ey #ere not illegally dismissed.

Fuerte@s demotion #as not e?ui)alent to a dismissal. 9isdemotion #as due to a )alid cause U to promote competition

among t(e employees of respondent. s (e #as una$le to$




meet t(e mont(ly sales ?uota5 (e #as rig(tly demoted andallo#ance #it((eld.

,eonardo #as also not illegally dismissed5 as it #as (e #(o)oluntarily left (is post after an in)estigation #as initiated to

loo3 into (is IsidelineJ $usiness.

s t(e company )alidly demoted Fuerte5 follo#ing companypolicy of doing so s(ould t(e employee fail to meet t(estandards set5 t(ere #as no constructi)e or illegal dismissal.6t #as #ell #it(in management@s prerogati)e to do so.

Bl'e Da!y Co!" # NLRCFacts:

• Respondent #as (ired $y petitioner as a food tec(nologist.

• Respondent oined t(e Production =anager one day in oneof t(e )isits of t(e client@s outlet5 #(ere t(e company cart(ey #ere riding #as (it $y a post as it fell due to t(e strong#inds.

• Respondent #as5 (o#e)er5 su$se?uently transferred to t(e)egeta$le processing section5 and #as no longer allo#ed toenter t(e la$oratory.

• Respondent led a complaint for constructi)e dismissal.

• , ruled in fa)or of respondent

• N,R+ aLrmed


9eld: Ees. Respondent #as constructi)ely dismissed.

lt(oug( it may $e a management prerogati)e to transferemployees #it(in t(e company5 $ased on eac( employee@s?ualications5 it must still $e done #it(in t(e limits pro)ided$y la#. <ince t(e petitioner failed to s(o# t(at t(e transfer#as not unreasona$le or it did not result in a diminution inpay or $enets5 t(ey #ere not a$le to o)ercome t(epresumption of constructi)e dismissal.

6n addition5 petitioner also failed to s(o# t(at t(e demotionof respondent #as )alid. 6ts only reasoning #as t(e incident

#(en t(ey )isited a client@s outlet. ccording to petitioner5

respondent #as scouting for (ouses using t(e company carand during oLce (ours. 9o#e)er5 respondent #as ne)ergi)en t(e opportunity to refute t(e narrations of t(ecompany dri)er.

x------------------------------------x

1.1.1.'Right to a +ork ,chedule-ull +ork +eek

Ma$la /ockey Cl'b E)"loyee( Labo! U$o$ # M/C2 I$cFacts:

• Respondent #as granted a legislati)e franc(ise to operateand maintain (orse races.

• Petitioner entered into a +B #it( respondent

• +B stated t(at t(e #or3 day s(all $e composed of A (oursstarting from %am to ;pm.

•

Respondent5 (o#e)er5 e)entually c(anged t(e sc(edule for uesday and (ursday to 1pm U &pm #(en (orse races are(eld.

• Petitioner a)erred t(at t(is )iolated t(e non-diminution in$enets clause of t(e ,a$or +ode5 as t(ey #ere no#precluded from rendering t(e usual o)ertime #or3 from;pm-%pm

• oluntary r$itrators found in fa)or of respondent

6ssue: WN t(ere #as a )iolation of t(e non-diminution of $enets5as stated in t(e ,a$or +ode8

9eld: No. 6t #as management@s prerogati)e to c(ange t(e #or3sc(edule of t(e regular employees.

(e c(ange in #or3 sc(edule #as )alidly done5 pursuant tot(e c(ange in (orse race sc(edules. s t(e (orse races nolonger started at 10am5 $ut at 2pm5 t(ere #as no #or3 to $edone in t(e morning. >)en t(e +B recogniHed t(eprerogati)e of respondent to adust t(e #or3 sc(edule of t(eemployees5 pro)ided t(e A-(our #or3 per day is follo#ed.

6n addition5 respondent #as not o$liged to pay o)ertime pay5as t(e +B merely states t(at any #or3 done in excess of A

(ours s(all $e compensated. =anagement still (ad t(e rig(t%




to determine #(et(er or not #or3 #as actually done inexcess of t(e A (ours mandated $y t(e +B. s t(is #as notcompany practice5 (a)ing only gi)en o)ertime occasionally5t(ere can $e no diminution in $enets.

U$co!$ Sa,e%y Gla(( # Ba(a!%eFacts:

• Respondent employees #or3ed for petitioner #it( a "-day#or3 sc(edule

• Peititoner e)entually informed respondent t(at t(eir#or3days s(all $e reduced due to economic considerations*decrease in sales5 increase in minimum #age5 etc

• Respondents expressed t(eir dismay in t(e decreased#or3days

• Petitioners5 (o#e)er5 again informed t(em of an impending#or3 rotation sc(edule5 #(ic( #ould5 in eKect5 lessen t(eir

#or3days e)en more to only / days a #ee3.• Respondents led a complaint for constructi)e dismissal

• , ruled in fa)or of respondents

• N,R+ aLrmed

• + re)ersed N,R+ 7 , rulings

6ssue: WN respondents #ere constructi)ely dismissed8

9eld: Ees. Respondents #ere constructi)ely dismissed.

+onstructi)e dismissal does not al#ays ta3e t(e form of adiminution in pay or $enets. 6t may also $e t(at an act of

t(e employer #as clearly discriminatory5 suc( t(at itrendered it impossi$le or un$eara$le for t(e employees tocontinue #or3ing t(ere.

lt(oug( management (as t(e prerogati)e to lessen t(e#or3 sc(edule of its employees5 it may only do so for )alid$usiness reasons. 6n t(e case at $ar5 t(e employees failed tos(o# t(at t(e rotation sc(edule #as actually done #it( goodfait( and #it( due regard for t(e rig(ts of la$or.

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1.1.1.;Right to a Bonus

P!od'ce!( Ba$k # NLRCFacts:

• Respondents are employees of petitioner

• Respondents led a complaint against petitioner fordiminution of $enets and non-payment of (oliday pay


• N,R+ re)ersed

6ssue: WN respondents are entitled to $onuses8

9eld: No. Respondents are not entitled to $onuses.

Respondents (a)e $een gi)en $onuses for t(e past 1/years5 as suc(5 t(ey reason t(at t(is (as already $ecome a

)ested rig(t. 9o#e)er5 t(e petitioners are correct in pointingout t(at due to nancial losses and its present condition$eing under conser)ators(ip5 t(ey cannot $e compelled topay t(e alleged $onus diKerentials.

Bonuses are amounts granted and paid to an employee for(is industry and loyalty #(ic( contri$uted to t(e success of t(e $usiness. (is is a management prerogati)e assomet(ing gi)en in addition to #(at is ordinarily recei)ed $yor strictly due to t(e recipient. (us5 it is not an enforcea$leor demanda$le o$ligation5 specially #(en t(e employer isalready experiencing deep nancial losses.

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1.1.1." /ncreasing the *i&isor

T!a$(3A(a P-l( E)"loyee( A((oc # NLRCFacts:

• Petitioners and Respondents entered into a +B #(ic(pro)ided t(at a 200Q (oliday pay #ould $e gi)en5 plus a"0Q premium.

• Petitioners re?uested for t(e payment of (oliday pay inarrears $ut #as not granted $y respondent

• Petitioner t(en led a complaint #it( t(e ,&




6ssue: WN Respondents are lia$le for (oliday pay8

9eld: No. Respondents (a)e already incorporated t(e payment forlegal (olidays in t(e mont(ly salary of t(e employees.

Petitioners contend t(at t(eir mont(ly salaries did not (a)et(e allo#ance for t(e payment of legal (oliday pay5 asnot(ing in t(eir payslips indicated t(at suc( payment #asgi)en. 9o#e)er5 respondents contend t(at t(ey (a)e long$een using t(e I2&"-dayJ di)isor in computing for t(eemployee@s o)ertime pay and daily rate deductions fora$sences.

;2 x '' V 2&" days &

#(ere ;2 V ! of #ee3s in a year'& V ! of #or3 (ours per #ee3& V !of #or3 (ours per day

2&" already ta3es into account t(e 10 legal (olidays in ayear5 as it only su$tracts t(e ;2 <undays and 2" <aturdays*employees are re?uired to #or3 day e)ery <aturday.9o#e)er5 t(e court still suggests t(at t(ere is a need toadust t(e 2&" day di)isor to 2&A for computations #(ic(#ould $e ad)antageous to t(e la$orer5 suc( as in computingt(e deductions for a$sences. 2&A di)isor is arri)ed at $yta3ing into account > 20/5 ta3ing into account 2 additional

special (olidays *all saints day 7 last day of t(e year andsu$tracting one legal (oliday *national (eroes day5 #(ic(al#ays falls on a <unday.

A!ella$o U$#e!(%y # CAFacts:

• Petitioner led a Notice of <tri3e #it( t(e N,R+ c(argingrespondents #it( )iolation of nfair ,a$or Practice5 includinga diminution in $enets $y using /1' days as di)isor incomputing t(e daily #age of t(e #or3ers.

• lt(oug( N,R+ tried to mediate5 petitioners still staged astri3e

6ssue: WN t(ere #as a diminution in $enets due to respondentusing /1' as di)isor8

9eld: No. (ere #as no diminution in pay.

Respondents use /1' as t(ey merely deducted t(e ;2un#or3ed <undays from /"" *total num$er of days peryear. (e factor used merely complies #it( t(e $asic rule5Ino #or35 no pay.J

x------------------------------------x

1.1.1.AConsultancy Arrangements on Top o# mployment with Related Company

Se)e$( P-l""$e( # Do)$*o

Facts:6n 1%&A5 Comingo signed an >mployment +ontract #it(=>+ *a su$sidiary of <iemens P(ilippines as a consultant. (ereafter5 Comingo #as gi)en additional #or3 $y =>+5 in#(ic( (e #as paid on top of (is original salary. (e extra#or3 #as t(e result of a contract entered into $y =>+ and<iemens Germany *a German company #(ic( (as anin)estment in <iemens P(ilippines5 #(ere$y =>+5 at t(ere?uest of <iemens Germany5 (ired Comingo to (andle t(eoperation of >N > C. n Danuary 1%%25 ><6 *asu$sidiary of <iemens P(ilippines a)ailed of Comingo@sser)ices as assistant manager. (e +ontract of >mployment

of Comingo #it( ><6 pro)ides t(at t(e latter s(all (a)e t(erig(t to assign t(e said contract in fa)or of <iemensP(ilippines. n =arc( 1"5 1%%25 #(ile still an assistantmanager of ><65 Comingo #as (ired as a consultant $y<iemens Germany in t(e eld of text and data net#or3s fora period of t#el)e *12 mont(s. s compensation5 (erecei)ed C=205000.005 paya$le once for e)ery t#el)e-mont( period. n =arc( /15 1%%25 <iemens Germany sent aletter to ><6 guaranteeing t(e consultancy agreement. n Dune 15 1%%25 Comingo signed a +ontract of >mployment#it( <iemens P(ilippines.

10






o)er t(e maority of t(e $usiness acti)ities of ><6 and5conse?uently5 $ecame Comingo@s employer.

x------------------------------------x

1.1.2 Forms of Payment:

LC ART. 10$Forms of payment. No employer shall pay thewages o# an employee by means o# promissory notes &ouchers coupons tokens tickets chits or any ob"ect other than legal tender e&en whenepressly re2uested by the employee.

'ayment o# wages by check or money order shall beallowed when such manner o# payment is customary on the date o# e3ecti&ity o# this Code or is necessary

because o# special circumstances as speci!ed inappropriate regulations to be issued by the ,ecretary o# Labor and mployment or as stipulated in acollecti&e bargaining agreement.

(4N/B5, R5L, /4'L4NT/N6 LCB((7 /// R5L 8/// ,C 1 9 $

SECTION . !anner of "age payment. As a general rule wages shall be paid in legal tender and the use o# tokens promissory notes &oucherscoupons or any other #orm alleged to represent legaltender is absolutely prohibited e&en when epressly

re2uested by the employee.

SECTION #. Payment by $he$%.'ayment o# wages by bank checks postal checks or money orders is allowed where such manner o# wage payment is customary on the date o# the e3ecti&ity o# the Code where it is so stipulated in a collecti&eagreement or where all o# the #ollowing conditionsare met:

;a< There is a bank or other #acility #or encashment within a radius o# one ;1<kilometer #rom the workplace=

;b< The employer or any o# his agents or

representati&es does not recei&e any pecuniary bene!t directly or indirectly #romthe arrangement=

;c< The employees are gi&en reasonable timeduring banking hours to withdraw their wages#rom the bank which time shall be consideredas compensable hours worked i# done duringworking hours= and

;d< The payment by check is with the writtenconsent o# the employees concerned i# there

is no collecti&e agreement authori>ing the payment o# wages by bank checks.

LAB(R A*8/,(R? (N AT4 'A?4NT,;N(84BR $@ 1<

Payment through automated teller ma$hine&'T!( of ban%s pro)ided the follo"ing$onditions are met*

1. The AT4 system o# payment is with the writtenconsent o# the employees concerned=

$. The employees are gi&en reasonable time towithdraw their wages #rom the bank #acility whichtime i# done during working hours shall beconsidered compensable hours worked=

. The system shall allow workers to recei&e their wages within the period or #re2uency and in theamount prescribed under the Labor Code asamended= chanrobles &irtual law library

D. There is a bank or AT4 #acility within a radius o# one ;1< kilometer to the place o# work=

12




@. 5pon re2uest o# the concerned employee-s theemployer shall issue a record o# payment o# wages bene!ts and deductions #or a particular period=

. There shall be n additional epenses and nodiminution o# bene!ts and pri&ileges as a result o# the AT4 system o# payment=

%. The employer shall assume responsibility in casethe wage protection pro&isions o# law andregulations are not complied with under thearrangement.

Na%o$al +ede!a%o$ o, Labo! # CAFacts: *see page /

6ssue: WN payment t(roug( c(ec3 is )alid payment orlegal tender8

9eld: Ees. Payment $y c(ec3 is allo#ed.

,a$or +ode rt. 102 and its implementing rulespro)ide t(at payment $y c(ec3 is allo#ed5 so long ast(e conditions stipulated in t(e mni$us Rules arefollo#ed.

x------------------------------------x

1.1./ Cistinction $et#een facilities and supplement

(4N/B5, R5L, /4'L4NT/N6 LCB((7 /// R5L 8// A ,C D E %

Se$. +. Cash ,age.The minimum wage rates prescribed in ,ection 1hereo# shall be basic cash wages without deductingthere#rom whate&er bene!ts supplements or allowances which the employees en"oy #ree o# charge aside #rom the basic pay. An employer may pro&ide subsidi>ed meals and snacks to his

employees pro&ided that the subsidy shall not beless than 0F o# the #air and reasonable &alue o# such #acilities. /n such case the employer may deduct #rom the wages o# the employees not morethan %0F o# the &alue o# the meals and snacks

en"oyed by the employees pro&ided that suchdeduction is with the written authori>ation o# theemployees concerned.

Se$. . Fa$ilities.The term G#acilitiesH as used in this Rule shall includearticles or ser&ices #or the bene!t o# the employee or his #amily but shall not include tools o# the trade or articles or ser&ices primarily #or the bene!t o# theemployer or necessary to the conduct o# theemployerIs business.

Se$. . /alue of fa$ilities.The ,ecretary o# Labor may #rom time to time ! inappropriate issuances the #air and reasonable &alueo# board lodging and other #acilities customarily #urnished by an employer to his employees both inagricultural and nonagricultural enterprises.

The #air and reasonable &alue o# #acilities is hereby determined to be the cost o# operation andmaintenance including ade2uate depreciation plusreasonable allowance ;but not more than @ 1-$ Finterest on the depreciated amount o# capital

in&ested by the employer<= pro&ided that i# the totalso computed is more than the #air rental &alue ;or the #air price o# the commodities or #acilities o3ered#or sale< the #air rental &alue ;or the #air price o# thecommodities or #acilities o3ered #or sale< shall be thereasonable cost o# the operation and maintenance.The rate o# depreciation and depreciated amount computed by the employer shall be those arri&ed at under good accounting practices.

The term Ggood accounting practicesH shall not include accounting practices which ha&e been

1




re"ected by the Bureau o# /nternal Re&enue #or income ta purposes. The term GdepreciationsH shallinclude obsolescence.

Se$. 0. '$$eptan$e of fa$ilities.

/n order that the cost o# #acilities #urnished by theemployer may be charged against an employee hisacceptance o# such #acilities must be &oluntary.

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1.1.' Place of Payment

LC ART. 10DPla$e of payment. 'ayment o# wages shall bemade at or near the place o# undertaking ecept as

otherwise pro&ided by such regulations as the,ecretary o# Labor and mployment may prescribeunder conditions to ensure greater protection o# wages.

(4N/B5, R5L, /4'L4NT/N6 LCB((7 /// R5L 8/// ,C D

As a general rule the place o# payment shall be at or near the place o# undertaking. 'ayment in a placeother than the work place shall be permissible only under the #ollowing circumstances:

;a< +hen payment cannot be e3ected at or near the place o# work by reason o# thedeterioration o# peace and order conditionsor by reason o# actual or impendingemergencies caused by !re Jood epidemicor other calamity rendering payment thereat impossible=

;b< +hen the employer pro&ides #reetransportation to the employees back and#orth= and

;c< 5nder any other analogous circumstances='ro&ided That the time spent by theemployees in collecting their wages shall beconsidered as compensable hours worked=

;d< No employer shall pay his employees in any bar night or day club drinking establishmentmassage clinic dance hall or other similar places or in places where games are playedwith stakes o# money or things representingmoney ecept in the case o# personsemployed in said places.

R5L, /4'L4NT/N6 RA %$%CKA'TR / ,C 1 9 $0

Se$tion 1. Payment of ,ages.5pon written petition o# the ma"ority o# the workers

and employees concerned all pri&ateestablishments companies businesses and other entities with at least twenty!&e workers and locatedwithin one kilometer radius to a commercial sa&ingsor rural bank shall pay the wages and other bene!tso# their workers through any o# said banks within the period and in the manner and #orm prescribed under the Labor Code as amended.

Se$tion #2. 3uty of 4an%.+hene&er applicable and upon re2uest o# aconcerned worker or union the bank through which

wages and other bene!ts are paid shall issue acerti!cation o# the record o# payment o# said wagesand bene!ts o# a particular worker or workers #or a particular payroll period.

+A6 RAT/(NAL/MAT/(N ACT ,C. %5pon written permission o# the ma"ority o# theemployees or workers concerned all pri&ateestablishments companies businesses and other entities with twenty !&e ;$@< or more employees andlocated within one ;1< kilometer radius to acommercial sa&ings or rural bank shall pay the

1!




wages and other bene!ts o# their employees throughany o# said banks and within the period o# payment o# wages !ed by 'residential *ecree No. DD$ asamended otherwise known as the Labor Code o# the'hilippines.

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1.1.; ime of Payment

LC ART. 10Time of payment. +ages shall be paid at least once e&ery two ;$< weeks or twice a month at inter&als not eceeding siteen ;1< days. /# onaccount o# #orce ma"eure or circumstances beyondthe employerIs control payment o# wages on or within the time herein pro&ided cannot be made the

employer shall pay the wages immediately a#ter such #orce ma"eure or circumstances ha&e ceased.No employer shall make payment with less#re2uency than once a month.

The payment o# wages o# employees engaged to per#orm a task which cannot be completed in two ;$<weeks shall be sub"ect to the #ollowing conditions inthe absence o# a collecti&e bargaining agreement or arbitration award:

1. That payments are made at inter&als not

eceeding siteen ;1< days in proportion tothe amount o# work completed=

$. That !nal settlement is made uponcompletion o# the work.

(4N/B5, R5L, /4'L4NT/N6 LCB((7 /// R5L 8/// ,C

;a< +ages shall be paid not less than once e&ery two;$< weeks or twice a month at inter&als not eceeding siteen ;1< days unless payment cannot be made with such regularity due to #orce

ma"eure or circumstances beyond the employerscontrol in which case the employer shall pay thewages immediately a#ter such #orce ma"eure or circumstances ha&e ceased.

;b< /n case o# payment o# wages by results in&ol&ingwork which cannot be !nished in two ;$< weeks payment shall be made at inter&als not eceeding siteen days in proportion to theamount o# work completed. inal settlement shallbe made immediately upon completion o# thework.

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1.1." Payment By Results

LC ART. 101Payment by results. The ,ecretary o# Labor andmployment shall regulate the payment o# wages by results including pakyao piecework and other nontime work in order to ensure the payment o# #air andreasonable wage rates pre#erably through time andmotion studies or in consultation withrepresentati&es o# workersI and employersI organi>ations.

(4N/B5, R5L, /4'L4NT/N6 LCB((7 /// R5L 8// A ,C O

Se$. 5. Payment of 6esults.(n petition o# any interested party or upon itsinitiati&e the *epartment o# labor shall use alla&ailable de&ises including the use o# time andmotion studies and consultation with representati&eso# employersI and workersI organi>ations todetermine whether the employees in any industry or enterprise are being compensated in accordancewith the minimum wage re2uirements o# this Rule.

;b< The basis #or the establishment o# rates #or piece output or contract work shall be the

1"




per#ormance o# an ordinary worker o# minimum skill or ability.

;c< An ordinary worker o# minimum skill or ability is the a&erage worker o# the lowest producing

group representing @0F o# the total number o# employees engaged in similar employment in a particular establishment ecludinglearners apprentices and handicappedworkers employed therein.

;d< +here the output rates established by theemployer do not con#orm with the standards prescribed herein or with the rates prescribed by the *epartment o# Labor in anappropriate order the employees shallentitled to the di3erence between the amount

to which they are entitled to recei&e under such prescribed standards or rates and that actually paid them by the employer.

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1.1.A Cirect Payment of Wages

LC ART. 10@3ire$t payment of "ages. +ages shall be paiddirectly to the workers to whom they are dueecept:

a< /n cases o# #orce ma"eure rendering such payment impossible or under other specialcircumstances to be determined by the ,ecretary o# Labor and mployment in appropriateregulations in which case the worker may be paid through another person under writtenauthority gi&en by the worker #or the purpose= or

b< +here the worker has died in which case the

employer may pay the wages o# the deceasedworker to the heirs o# the latter without the

necessity o# intestate proceedings. Theclaimants i# they are all o# age shall eecute anaPda&it attesting to their relationship to thedeceased and the #act that they are his heirs tothe eclusion o# all other persons. /# any o# the

heirs is a minor the aPda&it shall be eecuted onhis behal# by his natural guardian or neto#kin.The aPda&it shall be presented to the employer who shall make payment through the ,ecretary o# Labor and mployment or his representati&e.The representati&e o# the ,ecretary o# Labor andmployment shall act as re#eree in di&iding theamount paid among the heirs. The payment o# wages under this Article shall absol&e theemployer o# any #urther liability with respect tothe amount paid.

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1.1.& Pro(i$ition regarding Wages

LC ART. 11$ E 11 'rt. #. Non-interferen$e in disposal of "ages. No employer shall limit or otherwiseinter#ere with the #reedom o# any employee todispose o# his wages. Ke shall not in any manner #orce compel or oblige his employees to purchasemerchandise commodities or other property #romany other person or otherwise make use o# any

store or ser&ices o# such employer or any other person.

'rt. 7. ,age dedu$tion. No employer in hisown behal# or in behal# o# any person shall makeany deduction #rom the wages o# his employeesecept:

/n cases where the worker is insured with his consent by the employer and the deduction is to recompensethe employer #or the amount paid by him as premium on the insurance=

1#




or union dues in cases where the right o# theworker or his union to checko3 has been recogni>edby the employer or authori>ed in writing by theindi&idual worker concerned= and

/n cases where the employer is authori>ed by law or regulations issued by the ,ecretary o# Labor andmployment.

'rt. +. 3eposits for loss or damage. Noemployer shall re2uire his worker to make deposits#rom which deductions shall be made #or thereimbursement o# loss o# or damage to toolsmaterials or e2uipment supplied by the employerecept when the employer is engaged in suchtrades occupations or business where the practice o#

making deductions or re2uiring deposits is arecogni>ed one or is necessary or desirable asdetermined by the ,ecretary o# Labor andmployment in appropriate rules and regulations.

'rt. . 8imitations. No deduction #rom thedeposits o# an employee #or the actual amount o# theloss or damage shall be made unless the employeehas been heard thereon and his responsibility hasbeen clearly shown.

'rt. . ,ithholding of "ages and %i$%ba$%s

prohibited. /t shall be unlaw#ul #or any persondirectly or indirectly to withhold any amount #romthe wages o# a worker or induce him to gi&e up any part o# his wages by #orce stealth intimidationthreat or by any other means whatsoe&er without the workerIs consent.

'rt. 0. 3edu$tion to ensure employment. /t shall be unlaw#ul to make any deduction #rom thewages o# any employee #or the bene!t o# theemployer or his representati&e or intermediary as

consideration o# a promise o# employment or retention in employment.

'rt. 5. 6etaliatory measures. /t shall beunlaw#ul #or an employer to re#use to pay or reduce

the wages and bene!ts discharge or in any manner discriminate against any employee who has !led any complaint or instituted any proceeding under thisTitle or has testi!ed or is about to testi#y in such proceedings.

'rt. 1. False reporting. /t shall be unlaw#ul #or any person to make any statement report or record!led or kept pursuant to the pro&isions o# this Codeknowing such statement report or record to be #alsein any material respect.

(4N/B5, R5L, /4'L4NT/N6 LCB((7 /// R5L 8/// ,C 11

1$




1.2 Xey Pro)isions in t(e Wage RationaliHation ct *R "2A21.2.1 National Wage +ommission and t(e Regional Wages

and Producti)ity Board

1.2.2 W(at is a Wage rder4 <tandards+riteria for

=inimum Wage Fixing

1.2./ Wage Cistortion

LC ART. 100Prohibition against elimination or diminution of benets. Nothing in this Book shall be construed toeliminate or in any way diminish supplements or other employee bene!ts being en"oyed at the time o# promulgation o# this Code.

LC ART. 1$%

Non-diminution of benets. No wage order issuedby any regional board shall pro&ide #or wage rateslower than the statutory minimum wage rates prescribed by Congress.

x------------------------------------x

1.2./.1,cope o# Legal (bligation to Correct +age*istortion

BAN4ARD # NLRCFacts:

6ssue:

9eld:

x------------------------------------x

1.2./.2Concept o# Classi!cation

Na%o$al +ede!a%o$ # NLRC

Facts:

6ssue:

9eld:

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1.2././ /ntentional Quantitati&e *i3erences

Me%!o"ol%a$ Ba$k # NLRCFacts:

• Petitioners entered into a +B on =ay 1%&% #it( respondent$an35 #(ic( granted a #age increase of:- P%00mo eKecti)e 1%&%- P"00mo for 1%%0

- P200mo for 1%%1• n 1%&%5 only t(e regular employees #ere gi)en t(e

P%00mo increase• n Duly 1%&%5 R "A2A #as enacted5 xing ne# #age rates

- =inimum #age #as increased $y P2;- Pro)ided5 t(ose already recei)ing a$o)e minimum #age

up to P100 s(all also recei)e P2; increase in t(e daily#age

• Respondent $an3 ga)e P2; increaseday or PA;0mo to itspro$ationary employees or to t(ose #(o #ere ust promotedto regular5 $ut #ere still recei)ing P100 and $elo#

•

Petitioners contend t(at R "A2A resulted in categoriHationof:1. Pro$ationary employees as of enactment of R "A2A 7

t(ose promoted to regular status $ut recei)ing P100 orless

2. Regular employees as of Danuary 1%&% #it( o)erP100day #age

• Petitioners a)er t(at t(is reduced t(e salary gap

• Ban3 said only ".&Q of regular employees $eneted from#age increase

• , ruled in fa)or of petitioners5 saying t(ere 6< #agedistortion

1%




- 6t is enoug( t(at t(ere is a <>>R> +NR+6N of t(eintentional ?uantitati)e diKerence in #age rates $et#eenemployee groups

• N,R+ re)ersed ,

• Presiding +ommissioner Bonto-PereH of N,R+ dissented:

- Ouantitati)e diKerence $et#een t(ose regular as of enactment of +B and t(ose regulariHed only F>R #as+NR+>C $y more or less &/Q

- >?uita$le remedy #ould $e to correct t(at #agestructure $ased on formula suggested $y Regional ripartite Wages and Producti)ity +ommission

o =inimum Wage V Q x 6ncrease V dustmentctual <alary Prescri$ed

6ssue: WN R "A2A mandating an increase in pay of P2; created a#age distortion8

9eld: Ees. (ere is #age distortion.

Wage distortion is dened as a situation #(ere an increasein prescri$ed #age results in t(e elimination or <>>R>+NR+6N of intentional ?uantitati)e diKerences in#age or salary rates $et#een and among employee groupsin an esta$lis(ment as to eKecti)ely o$literate t(edistinctions em$odied in suc( #age structure $ased ons3ills5 lengt( of ser)ice5 or ot(er logical $ases of diKerentiation.

(e la# does not re?uire t(e complete elimination of t(ediKerence or gap $et#een t(e salary groups. 6t is enoug(t(at t(ere is a se)ere contraction or an extreme decrease int(e diKerence $et#een suc( groups.

(e +B set t(e intentional ?uantitati)e diKerence #(en itagreed to gi)e a P%00 increasemo to t(ose alreadyregulariHed as of t(e eKecti)ity of t(e +B. <ince t(eincrease #as granted only to t(ose #(o #ere not $enetted$y t(e +B5 t(e gap $et#een t(e 2 groups lessened. (us5t(ere is a need to adust t(e salary of t(ose #(o #ere$eneted $y t(e +B $y using t(e formula of t(e Presiding+ommissioner.

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1.2./.'3ect o# CBA subse2uent to the increase

PI Ma$',ac%'!$* # PI M,* S'"e!#(o!( a$d +o!e)e$Facts:

• R ""'0 #as enacted on Cecem$er 105 1%&Apro)iding for statutory minimum #age rates:- 10day- except non-agri #or3ers 7 t(ose outside == #(o

s(all recei)e an 11day increase- t(ose already recei)ing minimum #age up to

100day s(all recei)e increase of 10day• P6=<F *respondents entered into ne# +B on

Cecem$er 1&5 1%&A #it( petitioners after enactmentof said la#

- <uper)isors get increase of "2;mo- Foremen get increase of 'A;mo

• +B #as made to retroact to =ay 1%&A prior topassage of R ""'0 until 1%&%

• Respondents allege a #age distortion resulting fromimplementation of R

• , ruled in fa)or of respondents- Cecision stated t(at union cannot #ai)e future

$enets- 1/.;Q increase s(ould also $e gi)en to t(e

foremen 7 super)isorso

=inimum #age #as ;'dayo 6ncrease of 10day5 ma3ing it "'day is

1/.;Q• N,R+ aLrmed ,

• Petition for certiorari to <+ $ut referred to + $asedon udicial (ierarc(y *N,R+ decisions re)ie#ed $y +t(roug( original action on certiorari $efore <+ canre)ie#

• + aLrmed N,R+ $ut modied 1/.;Q to 1&.;Q- (e increase resulting in #age distortions from

t(e implementation of R ""'0 cannot $e #ai)ed

1&




- Petitioners claimed t(at since +B #as signedsu$se?uent to implementation of R5 t(ey #eredeemed to (a)e #ai)ed t(e $enets of suc( R

- 1&.;Q is used $ecause 10day increase of ;'dayis 1&.;Q

6ssue: WN implementation of R ""'0 caused #agedistortion8 E><.WN suc( distortion #as cured $y su$se?uent 1%&A+B8 E><.

Ees. (ere #as #age distortion. But suc( #as cured$y t(e +B.

Wage distortion is t(e disappearance or )irtualdisappearance of pay diKerentials $et#een lo#er 7(ig(er positions in an enterprise $ecause of

compliance #it( a #age order.

(e 2 foremen 7 1 super)isor earning less t(an100day got t(e 10peso increase ma3ing t(em earnmore t(an t(ose #(o (a)e seniority in t(e company. (is eliminated t(e intentional ?uantitati)ediKerence in #age rates. 9o#e)er5 t(is #as cured#(en t(e +B #as enacted5 increasing t(e mont(lypay of super)isors $y "2;pesos more t(an dou$let(e 10day granted $y R ""'05 7 'A;pesos almostdou$le t(e R increase.

(e gap $roug(t a$out $y R ""'0 #as re-esta$lis(ed $y t(e enactment of t(e +B. >)ent(oug( suc( #as not t(e result of a special grie)anceprocedure5 suc( cannot $e ignored. Respondentscannot enoy t(e $enets of t(e +B $ut ignore t(econcessions )oluntarily extended to petitioners.

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1.2./.;*isparity between regions

P!'ba$ke!( A((oc # P!'de$%al Ba$k

Facts:• Regional ripartite Wages 7 Producti)ity Board of Region

ordered an increase in cost of li)ing allo#ance *+, $y1A.;0 in Naga 7 ,egaspi5 1;.;0 in a$aco municipality 7 /ot(ers5 and 10.00 for all ot(ers.

• RWPB of Region 66 issued anot(er order mandating t(eincrease in +, $y 10pesos in +e$u5 =andaue 7 ,apulapu5and ;pesos in t(e ot(ers.

• Respondent $an3 implemented t(e orders on its employeesin said regions.

• Petitioners contend t(at t(e #age increase s(ould $eimplemented to all its employees e)en outside Regions 7665 as t(is caused a #age distortion.

• r$itration committee ruled in fa)or of $an3.

• + aLrmed.- underlying considerations in issuing #age orders are

di)erse5 $ased on distincti)e situations in eac( region- distinctions in t(e region are maintained despiteimplementation of t(e orders5 as all its employees #eregranted t(e #age increase.

6ssue: WN #age distortion resulted from implementation of t(e#age orders8

9eld: No. (ere #as no #age distortion.

Ouantitati)e diKerence remained t(e same in all $ranc(es int(e aKected region. Cisparity in #ages among t(ose located

in t(e same rungs in t(e corporate ladder5 $ut in diKerentregions5 does not constitute #age distortion. Wage distortionarises #(en #age order results in #age parity $et#eenemployees in diKerent rungs $ut in t(e same region5 not t(eot(er #ay around.

R "A2A *Wage RationaliHation ct recogniHes t(e existingregional disparities in t(e cost of li)ing. 6n determining #ageincreases5 t(e $oard loo3s at t(e existing regional disparitiesin t(e +, and ot(er socio-economic factors. Wages inot(er areas may $e increased to pre)ent migration to t(eN+R5 (ence5 decongesting t(e metropolis. (ere are5 after

20




all5 diKerent needs for diKerent situations in diKerent regionsof t(e country.

(is does not )iolate e?ual pay for e?ual #or3 $ecause t(ereare )arying necessities in eac( region 7 t(e increase #ill $e

$ased on suc( pre)ailing situations.

(e $an3 in its entirety is also not #(at t(e la# en)isions asan Iesta$lis(mentJ for t(e purposes of determining #agedistortions. <ection 1/ of R "A2A pro)ides t(at t(eminimum #age rates in $ranc(es of esta$lis(ments in oroutside t(e N+R s(all $e t(ose applica$le in t(e P,+>W9>R> 9>E R> <N+6N>C.

(ere #as also no management practice5 as t(e $an3 onlyimplemented t(e uniform #age policy $efore t(e enactmentof R "A2A. <ince t(en5 t(ey #ere mandated to regionaliHe

its #age structure. single instance cannot e?uate tomanagement practice.

,ide issue: (ere #as forum s(opping. )oluntaryar$itration case #as still pending #(en t(e case #as led#it( t(e courts. >lements of litis pendentia are present.

1. <ame parties2. <ame rig(ts 7 relief prayed for/. Dudgment rendered in one #ill amount to res udicata

in t(e ot(erlt(oug( )oluntary ar$itration issue #as #(et(er adoptionof #age orders are )alid 7 $inding4 #(ile t(e one in t(e

courts #as #(et(er t(ere #as #age distortion5 it still $oilsdo#n to one issue: )alidity of t(e $an3@s regionaliHing its#age structure $ased on t(e #age orders.

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1.2.' Wage RationaliHation ct Y' *c 7 *d

*c >xempted from t(e pro)isions of t(is ct are(ouse(old or domestic (elpers and personsemployed in t(e personal ser)ice of anot(er5including family dri)ers.

Retailser)ice esta$lis(ments regularly employingnot more t(an ten *10 #or3ers may $e exemptedfrom t(e applica$ility of t(is ct upon application#it( and as determined $y t(e appropriate

Regional Board in accordance #it( t(e applica$lerules and regulations issued $y t(e +ommission.W(ene)er an application for exemption (as $eenduly led #it( t(e appropriate Regional Board5action on any complaint for alleged non-compliance #it( t(is ct s(all $e deferredpending resolution of t(e application forexemption $y t(e appropriate Regional Board.

6n t(e e)ent t(at applications for exemptions arenot granted5 employees s(all recei)e t(eappropriate compensation due t(em as pro)ided

for $y t(is ct plus interest of one per cent *1Qper mont( retroacti)e to t(e eKecti)ity of t(isct.

*d 6f expressly pro)ided for and agreed upon in t(ecollecti)e $argaining agreements5 all increases int(e daily $asic #age rates granted $y t(eemployers t(ree */ mont(s $efore t(e eKecti)ityof t(is ct s(all $e credited as compliance #it(t(e increases in t(e #age rates prescri$ed (erein5pro)ided t(at5 #(ere suc( increases are less t(ant(e prescri$ed increases in t(e #age rates under

t(is ct5 t(e employer s(all pay t(e diKerence.<uc( increases s(all not include anni)ersary#age increases5 merit #age increases and t(oseresulting from t(e regulariHation or promotion of employees.

W(ere t(e application of t(e increases in t(e#age rates under t(is <ection results indistortions as dened under existing la#s in t(e#age structure #it(in an esta$lis(ment and gi)esrise to a dispute t(erein5 suc( dispute s(all rst$e settled )oluntarily $et#een t(e parties and in

21




t(e e)ent of a deadloc35 t(e same s(all $e nallyresol)ed t(roug( compulsory ar$itration $y t(eregional $ranc(es of t(e National ,a$or Relations+ommission *N,R+ (a)ing urisdiction o)er t(e#or3place.

6t s(all $e mandatory for t(e N,R+ to conductcontinuous (earings and decide any disputearising under t(is <ection #it(in t#enty *20calendar days from t(e time said dispute isformally su$mitted to it for ar$itration. (ependency of a dispute arising from a #agedistortion s(all not in any #ay delay t(eapplica$ility of t(e increase in t(e #age ratesprescri$ed under t(is <ection.

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1.2.; Wage RationaliHation ct Y12

ny person. corporation. trust. rm. parmersnip.association or entity #(ic( refuses or fails to pay anyof t(e prescri$ed increases or adustments in t(e#age rales made in accordance #it( t(is ct s(all $epunis(ed $y a ne not less t(an #enty-)et(ousand pesos *P2;.000 nor more t(an ne(undred t(ousand pesos *P100.000 or imprisonmentof not less t(an t#o *2 years nor more t(an four *'years or $ot( suc( ne and imprisonment at t(e

discretion of t(e court:Pro)ided. (at any person con)icted under t(is cts(all not $e entitled to t(e $enets pro)ided forunder t(e Pro$ation ,a#.

(e employer concerned s(all $e ordered to pay anarnount e?ui)alent to dou$le t(e unpaid $enetso#ing to t(e employees: Pro)ided. (at payment of indemnity s(all not a$sol)e t(e employer from t(ecriminal lia$ility imposa$le under t(is ct.

6f t(e )iolation is committed $y a corporation. trust orrm. partners(ip5 association or any ot(er entity5 t(epenalty of imprisonment s(all $e imposed upon t(eentityZs responsi$le oLcers including $ut not limitedto t(e president5 )icepresident5 c(ief executi)e

oLcer5 general manager5 managing director orpartner.

x------------------------------------x

1.2." Wage rder N+R-1"

1. (e P22.00 per day +, prescri$ed in t(is rders(all apply to all minimum #age earners in t(epri)ate sector in N+R5 regardless of t(eir position5designation or status of employment andirrespecti)e of t(e met(od $y #(ic( t(ey are

paid4

2. (e P22.00 per day +, s(all N co)er(ouse(old or domestic (elpers5 persons in t(epersonal ser)ice of anot(er5 including familydri)ers5 and #or3ers of duly registered Barangay=icro Business >nterprises *B=B>s #it(+erticates of ut(ority pursuant to Repu$lic ct%1A&4

/. (e follo#ing may $e exempted from t(eapplica$ility of t(e Wage rder: 1 Cistressed

>sta$lis(ments4 2 Retail<er)ice >sta$lis(mentsRegularly >mploying Not =ore (an en *10Wor3ers4 / >sta$lis(ments #(ose otal ssetsincluding t(ose arising from loans $ut exclusi)e of t(e land on #(ic( t(e particular $usiness entity@soLce5 plant and e?uipment are situated5 are notmore t(an P/ =illion4 and ' >sta$lis(mentsd)ersely Kected $y Natural +alamities.

'. (is rder s(all not reduce any existing #agerates5 allo#ances and $enets of any form underexisting la#s5 decrees5 issuances5 executi)e

22




orders andor under any contract or agreement$et#een t(e #or3ers and employers4

;. (is rder s(all not pre)ent #or3ers in particularrms or industries from $argaining for (ig(er

#ages #it( t(eir respecti)e employers4

". ny increase granted $y an employer in anorganiHed esta$lis(ment #it(in t(ree */ mont(sprior to t(e eKecti)ity of t(is rder s(all $ecredited as compliance #it( t(e prescri$edincrease set fort( (erein5 pro)ided t(at anagreement to t(is eKect (as $een forged$et#een t(e parties or a collecti)e $argainingagreement pro)ision allo#ing credita$ility exists.6n t(e a$sence of suc( an agreement or pro)isionin t(e +B5 any increase granted $y t(e employer

s(all not $e credited as compliance #it( t(e+, prescri$ed in t(is rder.

6n case t(e increases gi)en are less t(an t(eprescri$ed +,5 t(e employer s(all pay t(ediKerence. <uc( increases s(all not includeanni)ersary increases5 merit #age increases andt(ose resulting from t(e regulariHation orpromotion of employees.

A. 6n unorganiHed esta$lis(ments5 any increasegranted $y t(e employer #it(in )e *; mont(s

prior to t(e eKecti)ity of t(is rder s(all $ecredited as compliance t(ere#it(.

6n case t(e increases gi)en are less t(an t(eprescri$ed +,5 t(e employer s(all pay t(ediKerence. <uc( increases s(all not includeanni)ersary increases5 merit #age increases andt(ose resulting from t(e regulariHation orpromotion of employees.

&. 6n t(e case of contracts for construction proectsand for security5 anitorial and similar ser)ices5

t(e +, prescri$ed in t(is rder s(all $e $orne$y t(e principals or clients of t(econstructionser)ice contractors and t(e contracts(all $e deemed amended accordingly.

6n t(e e)ent5 (o#e)er5 t(at t(e principals orclients fail to pay t(e prescri$ed #age rates5 t(econstructionser)ice contractor s(all $e ointlyand se)erally lia$le #it( (is principal or client.

%. 6n t(e case of pri)ate educational institutions5 t(es(are of co)ered #or3ers and employees in t(eincrease in tuition fees for <c(ool Eear 2011-2012s(all $e considered as compliance #it( t(e +,prescri$ed (erein. 9o#e)er5 payment of anys(ortfall in t(e #age increase set fort( (ereins(all $e co)ered starting <c(ool Eear 2012-201/.

Pri)ate educational institutions #(ic( (a)e notincreased t(eir tuition fees for <c(ool Eear 2011-2012 may defer compliance #it( t(e +,prescri$ed (erein until t(e $eginning of <c(ool Eear 2012-201/.

6n any case5 all pri)ate educational institutionss(all implement t(e +, prescri$ed (ereinstarting <c(ool Eear 2012-201/.

10.ll #or3ers paid $y result5 including t(ose #(o

are paid on piece#or35 Ita3ayJ or tas3 $asis5 s(all$e entitled to recei)e not less t(an t(e prescri$ed+, a day5 or a proportion t(ereof for #or3ingless t(an eig(t *& (ours4

11.Wages of apprentices and learners s(all in nocase $e less t(an se)enty-)e percent *A;Q of t(e applica$le ne# #age rates prescri$ed in t(isrder.

ll recogniHed learners(ip and apprentices(ipagreements entered into $efore t(e eKecti)ity of

2




t(is rder s(all $e considered automaticallymodied insofar as t(eir #age clauses areconcerned to re[ect t(e ne# #age rates.

ll ?ualied (andicapped #or3ers s(all recei)e

t(e full amount of t(e ne# #age rates prescri$ed(erein pursuant to Repu$lic ct No. A2AA5ot(er#ise 3no#n as t(e =agna +arta for Cisa$ledPersons.

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1./ 9ours of Wor3 Nig(t <(ift5 )ertime

LC Art. O$0A!%. 56. Co#e!a*e. (e pro)isions of t(is itle s(allapply to employees in all esta$lis(ments and

underta3ings #(et(er for prot or not5 $ut not togo)ernment employees5 managerial employees5 eldpersonnel5 mem$ers of t(e family of t(e employer#(o are dependent on (im for support5 domestic(elpers5 persons in t(e personal ser)ice of anot(er5and #or3ers #(o are paid $y results as determined$y t(e <ecretary of ,a$or in appropriate regulations.

s used (erein5 \managerial employees\ refer tot(ose #(ose primary duty consists of t(emanagement of t(e esta$lis(ment in #(ic( t(ey areemployed or of a department or su$di)ision t(ereof5

and to ot(er oLcers or mem$ers of t(e managerialstaK.

\Field personnel\ s(all refer to non-agriculturalemployees #(o regularly perform t(eir duties a#ayfrom t(e principal place of $usiness or $ranc( oLceof t(e employer and #(ose actual (ours of #or3 int(e eld cannot $e determined #it( reasona$lecertainty.

A!%. 57. No!)al -o'!( o, o!k. (e normal (oursof #or3 of any employee s(all not exceed eig(t *&(ours a day.

9ealt( personnel in cities and municipalities #it( a

population of at least one million *150005000 or in(ospitals and clinics #it( a $ed capacity of at leastone (undred *100 s(all (old regular oLce (ours foreig(t *& (ours a day5 for )e *; days a #ee35exclusi)e of time for meals5 except #(ere t(eexigencies of t(e ser)ice re?uire t(at suc( personnel#or3 for six *" days or forty-eig(t *'& (ours5 in#(ic( case5 t(ey s(all $e entitled to an additionalcompensation of at least t(irty percent */0Q of t(eirregular #age for #or3 on t(e sixt( day. For purposesof t(is rticle5 \(ealt( personnel\ s(all includeresident p(ysicians5 nurses5 nutritionists5 dietitians5

p(armacists5 social #or3ers5 la$oratory tec(nicians5paramedical tec(nicians5 psyc(ologists5 mid#i)es5attendants and all ot(er (ospital or clinic personnel.

A!%. 58. Ho'!( o!ked. 9ours #or3ed s(all include*a all time during #(ic( an employee is re?uired to$e on duty or to $e at a prescri$ed #or3place4 and*$ all time during #(ic( an employee is suKered orpermitted to #or3.

Rest periods of s(ort duration during #or3ing (ourss(all $e counted as (ours #or3ed.

A!%. 59. Meal "e!od(. <u$ect to suc( regulationsas t(e <ecretary of ,a$or may prescri$e5 it s(all $et(e duty of e)ery employer to gi)e (is employees notless t(an sixty *"0 minutes time-oK for t(eir regularmeals.

A!%. 5. N*-% (-,% d;e!e$%al. >)ery employees(all $e paid a nig(t s(ift diKerential of not less t(anten percent *10Q of (is regular #age for eac( (ourof #or3 performed $et#een ten o@cloc3 in t(ee)ening and six o@cloc3 in t(e morning.

2!




A!%. 5<. O#e!%)e o!k. Wor3 may $e performed$eyond eig(t *& (ours a day pro)ided t(at t(eemployee is paid for t(e o)ertime #or35 an additionalcompensation e?ui)alent to (is regular #age plus at

least t#enty-)e percent *2;Q t(ereof. Wor3performed $eyond eig(t (ours on a (oliday or restday s(all $e paid an additional compensatione?ui)alent to t(e rate of t(e rst eig(t (ours on a(oliday or rest day plus at least t(irty percent */0Qt(ereof.

A!%. 55. U$de!%)e $o% o;(e% by o#e!%)e.ndertime #or3 on any particular day s(all not $eoKset $y o)ertime #or3 on any ot(er day. Permissiongi)en to t(e employee to go on lea)e on some ot(erday of t(e #ee3 s(all not exempt t(e employer from

paying t(e additional compensation re?uired in t(is+(apter.

A!%. 5=. E)e!*e$cy o#e!%)e o!k. nyemployee may $e re?uired $y t(e employer toperform o)ertime #or3 in any of t(e follo#ing cases:

W(en t(e country is at #ar or #(en any ot(ernational or local emergency (as $een declared $yt(e National ssem$ly or t(e +(ief >xecuti)e4 W(en it is necessary to pre)ent loss of life or

property or in case of imminent danger to pu$licsafety due to an actual or impending emergency int(e locality caused $y serious accidents5 re5 [ood5typ(oon5 eart(?ua3e5 epidemic5 or ot(er disaster orcalamity4 W(en t(ere is urgent #or3 to $e performed onmac(ines5 installations5 or e?uipment5 in order toa)oid serious loss or damage to t(e employer orsome ot(er cause of similar nature4

W(en t(e #or3 is necessary to pre)ent loss ordamage to peris(a$le goods4 and W(ere t(e completion or continuation of t(e #or3started $efore t(e eig(t( (our is necessary to

pre)ent serious o$struction or preudice to t(e$usiness or operations of t(e employer.ny employee re?uired to render o)ertime #or3under t(is rticle s(all $e paid t(e additionalcompensation re?uired in t(is +(apter.

A!%. =>. Co)"'%a%o$ o, add%o$alco)"e$(a%o$. For purposes of computing o)ertimeand ot(er additional remuneration as re?uired $y t(is+(apter5 t(e \regular #age\ of an employee s(allinclude t(e cas( #age only5 #it(out deduction onaccount of facilities pro)ided $y t(e employer.

(mnibus /mplementing Rules Labor Code Book ///RULE I3A

Ho'!( o, ?o!k o, Ho("%al a$d Cl$c Pe!(o$$el

SECTION 1. Ge$e!al (%a%e)e$% o$ co#e!a*e. ] (is Rule s(all apply to:

*a ll (ospitals and clinics5 including t(ose #it( a$ed capacity of less t(an one (undred *100 #(ic(are situated in cities or municipalities #it( apopulation of one million or more4 and

*$ ll (ospitals and clinics #it( a $ed capacity of atleast one (undred *1005 irrespecti)e of t(e siHe of t(e population of t(e city or municipality #(ere t(eymay $e situated.

SECTION 6. Ho("%al( o! cl$c( %-$ %-e)ea$$* o, %-( R'le. ] (e terms \(ospitals\ and\clinics\ as used in t(is Rule s(all mean a placede)oted primarily to t(e maintenance and operationof facilities for t(e diagnosis5 treatment and care of indi)iduals suKering from illness5 disease5 inury5 or

2"






s(all also $e entitled to o)ertime pay for ser)icesrendered in excess of forty (ours a #ee35 or in excessof eig(t (ours a day5 #(ic(e)er #ill yield t(e (ig(eradditional compensation to t(e employee in t(e #or3#ee3.

SECTION 1>. Rela%o$ %o R'le I. ] ll pro)isionsof Rule 6 of t(is Boo3 #(ic( are not inconsistent #it(t(is Rule s(all $e deemed applica$le to (ospital andclinic personnel.

RULE IIN*-% S-,% D;e!e$%al

SECTION 1. Co#e!a*e. ] (is Rule s(all apply toall employees except:*a (ose of t(e go)ernment and any of its political

su$di)isions5 including go)ernment-o#ned andorcontrolled corporations4*$ (ose of retail and ser)ice esta$lis(mentsregularly employing not more t(an )e *; #or3ers4*c Comestic (elpers and persons in t(e personalser)ice of anot(er4*d =anagerial employees as dened in Boo3 (reeof t(is +ode4*e Field personnel and ot(er employees #(ose timeand performance is unsuper)ised $y t(e employerincluding t(ose #(o are engaged on tas3 or contract$asis5 purely commission $asis5 or t(ose #(o are

paid a xed amount for performing #or3 irrespecti)eof t(e time consumed in t(e performance t(ereof.

SECTION 6. N*-% (-,% d;e!e$%al. ] nemployee s(all $e paid nig(t s(ift diKerential of noless t(an ten per cent *10Q of (is regular #age foreac( (our of #or3 performed $et#een ten oZcloc3 int(e e)ening and six oZcloc3 in t(e morning.

SECTION 7. Add%o$al co)"e$(a%o$. ] W(erean employee is permitted or suKered to #or3 on t(eperiod co)ered after (is #or3 sc(edule5 (e s(all $e

entitled to (is regular #age plus at least t#enty-)eper cent *2;Q and an additional amount of no lesst(an ten per cent *10Q of suc( o)ertime rate foreac( (our or #or3 performed $et#een 10 p.m. to "a.m.

SECTION 8. Add%o$al co)"e$(a%o$ o$(c-ed'led !e(% day@("ecal -olday. ] nemployee #(o is re?uired or permitted to #or3 ont(e period co)ered during rest days andor special(olidays not falling on regular (olidays5 s(all $e paida compensation e?ui)alent to (is regular #age plusat least t(irty */0Q per cent and an additionalamount of not less t(an ten *10Q per cent of suc(premium pay rate for eac( (our of #or3 performed.

SECTION 9. Add%o$al co)"e$(a%o$ o$ !e*'la!

-olday(. ] For #or3 on t(e period co)ered duringregular (olidays5 an employee s(all $e entitled to (isregular #age during t(ese days plus an additionalcompensation of no less t(an ten *10Q per cent of suc( premium rate for eac( (our of #or3 performed.

SECTION . Rela%o$ %o a*!ee)e$%(. ] Not(ingin t(is Rule s(all ustify an employer in #it(dra#ingor reducing any $enets5 supplements or paymentsas pro)ided in existing indi)idual or collecti)eagreements or employer practice or policy.

x------------------------------------x

1.' 9olidays and ,ea)es etc.1.'.1 Rates

LC Art. 1A!%. =1. R*-% %o eekly !e(% day.

6t s(all $e t(e duty of e)ery employer5 #(et(eroperating for prot or not5 to pro)ide eac( of (isemployees a rest period of not less t(an t#enty-four

2$




*2' consecuti)e (ours after e)ery six *"consecuti)e normal #or3 days. (e employer s(all determine and sc(edule t(e#ee3ly rest day of (is employees su$ect to

collecti)e $argaining agreement and to suc( rulesand regulations as t(e <ecretary of ,a$or and>mployment may pro)ide. 9o#e)er5 t(e employers(all respect t(e preference of employees as to t(eir#ee3ly rest day #(en suc( preference is $ased onreligious grounds.

A!%. =6. ?-e$ e)"loye! )ay !e'!e o!k o$ a!e(% day. (e employer may re?uire (is employeesto #or3 on any day:

6n case of actual or impending emergencies caused

$y serious accident5 re5 [ood5 typ(oon5 eart(?ua3e5epidemic or ot(er disaster or calamity to pre)ent lossof life and property5 or imminent danger to pu$licsafety4 6n cases of urgent #or3 to $e performed on t(emac(inery5 e?uipment5 or installation5 to a)oidserious loss #(ic( t(e employer #ould ot(er#isesuKer4 6n t(e e)ent of a$normal pressure of #or3 due tospecial circumstances5 #(ere t(e employer cannot

ordinarily $e expected to resort to ot(er measures4 o pre)ent loss or damage to peris(a$le goods4 W(ere t(e nature of t(e #or3 re?uires continuousoperations and t(e stoppage of #or3 may result inirrepara$le inury or loss to t(e employer4 and nder ot(er circumstances analogous or similar tot(e foregoing as determined $y t(e <ecretary of ,a$or and >mployment.

A!%. =7. Co)"e$(a%o$ ,o! !e(% day2 S'$day o!-olday o!k.

W(ere an employee is made or permitted to #or3 on(is sc(eduled rest day5 (e s(all $e paid an additional

compensation of at least t(irty percent */0Q of (isregular #age. n employee s(all $e entitled to suc(additional compensation for #or3 performed on<unday only #(en it is (is esta$lis(ed rest day.W(en t(e nature of t(e #or3 of t(e employee is suc(t(at (e (as no regular #or3days and no regular restdays can $e sc(eduled5 (e s(all $e paid an additionalcompensation of at least t(irty percent */0Q of (isregular #age for #or3 performed on <undays and(olidays.Wor3 performed on any special (oliday s(all $e paidan additional compensation of at least t(irty percent

*/0Q of t(e regular #age of t(e employee. W(eresuc( (oliday #or3 falls on t(e employee@s sc(eduledrest day5 (e s(all $e entitled to an additionalcompensation of at least fty per cent *;0Q of (isregular #age.W(ere t(e collecti)e $argaining agreement or ot(erapplica$le employment contract stipulates t(epayment of a (ig(er premium pay t(an t(atprescri$ed under t(is rticle5 t(e employer s(all paysuc( (ig(er rate.

A!%. =8. R*-% %o -olday "ay.

>)ery #or3er s(all $e paid (is regular daily #ageduring regular (olidays5 except in retail and ser)iceesta$lis(ments regularly employing less t(an ten*10 #or3ers4 (e employer may re?uire an employee to #or3 onany (oliday $ut suc( employee s(all $e paid acompensation e?ui)alent to t#ice (is regular rate4and

2%




s used in t(is rticle5 \(oliday\ includes: Ne# Eear@sCay5 =aundy (ursday5 Good Friday5 t(e nint( of pril5 t(e rst of =ay5 t(e t#elft( of Dune5 t(e fourt(of Duly5 t(e t(irtiet( of No)em$er5 t(e t#enty-ft(and t(irtiet( of Cecem$er and t(e day designated $y

la# for (olding a general election.

A!%. =9. R*-% %o (e!#ce $ce$%#e lea#e.

>)ery employee #(o (as rendered at least one yearof ser)ice s(all $e entitled to a yearly ser)iceincenti)e lea)e of )e days #it( pay. (is pro)ision s(all not apply to t(ose #(o arealready enoying t(e $enet (erein pro)ided5 t(oseenoying )acation lea)e #it( pay of at least )e daysand t(ose employed in esta$lis(ments regularly

employing less t(an ten employees or inesta$lis(ments exempted from granting t(is $enet$y t(e <ecretary of ,a$or and >mployment afterconsidering t(e )ia$ility or nancial condition of suc(esta$lis(ment. (e grant of $enet in excess of t(at pro)ided (ereins(all not $e made a su$ect of ar$itration or anycourt or administrati)e action.

A!%. =. Se!#ce c-a!*e(. ll ser)ice c(argescollected $y (otels5 restaurants and similar

esta$lis(ments s(all $e distri$uted at t(e rate of eig(ty-)e percent *&;Q for all co)ered employeesand fteen percent *1;Q for management. (es(are of t(e employees s(all $e e?ually distri$utedamong t(em. 6n case t(e ser)ice c(arge is a$olis(ed5t(e s(are of t(e co)ered employees s(all $econsidered integrated in t(eir #ages.

(mnibus /mplementing Rules Book ///RULE III

?eekly Re(% Pe!od(

SECTION 1. Ge$e!al (%a%e)e$% o$ co#e!a*e. ] (is Rule s(all apply to all employers #(et(eroperating for prot or not5 including pu$lic utilitiesoperated $y pri)ate persons.

SECTION 6. B'($e(( o$ S'$day(@Holday(. ] llesta$lis(ments and enterprises may operate or openfor $usiness on <undays and (olidays pro)ided t(att(e employees are gi)en t(e #ee3ly rest day and t(e$enets as pro)ided in t(is Rule.

SECTION 7. ?eekly !e(% day. ] >)ery employers(all gi)e (is employees a rest period of not lesst(an t#enty-four *2' consecuti)e (ours after e)erysix consecuti)e normal #or3 days.

SECTION 8. P!e,e!e$ce o, e)"loyee. ] (e

preference of t(e employee as to (is #ee3ly day of rest s(all $e respected $y t(e employer if t(e sameis $ased on religious grounds. (e employee s(allma3e 3no#n (is preference to t(e employer in#riting at least se)en *A days $efore t(e desiredeKecti)ity of t(e initial rest day so preferred.W(ere5 (o#e)er5 t(e c(oice of t(e employee as to(is rest day $ased on religious grounds #ill ine)ita$lyresult in serious preudice or o$struction to t(eoperations of t(e underta3ing and t(e employercannot normally $e expected to resort to ot(erremedial measures5 t(e employer may so sc(edule

t(e #ee3ly rest day of (is c(oice for at least t#o *2days in a mont(.

SECTION 9. Sc-ed'le o, !e(% day. ] *a W(eret(e #ee3ly rest is gi)en to all employeessimultaneously5 t(e employer s(all ma3e 3no#n suc(rest period $y means of a #ritten notice postedconspicuously in t(e #or3 place at least one #ee3$efore it $ecomes eKecti)e.*$ W(ere t(e rest period is not granted to allemployees simultaneously and collecti)ely5 t(eemployer s(all ma3e 3no#n to t(e employees t(eir

2&




respecti)e sc(edules of #ee3ly rest t(roug( #rittennotices posted conspicuously in t(e #or3 place atleast one #ee3 $efore t(ey $ecome eKecti)e.

SECTION . ?-e$ o!k o$ !e(% day a'%-o!ed.

] n employer may re?uire any of (is employees to#or3 on (is sc(eduled rest day for t(e duration of t(efollo#ing emergencies and exceptional conditions:*a 6n case of actual or impending emergenciescaused $y serious accident5 re5 [ood5 typ(oon5eart(?ua3e5 epidemic or ot(er disaster or calamity5to pre)ent loss of life or property5 or in cases of forcemaeure or imminent danger to pu$lic safety4*$ 6n case of urgent #or3 to $e performed onmac(ineries5 e?uipment or installations to a)oidserious loss #(ic( t(e employer #ould ot(er#isesuKer4

*c 6n t(e e)ent of a$normal pressure of #or3 due tospecial circumstances5 #(ere t(e employer cannotordinarily $e expected to resort to ot(er measures4*d o pre)ent serious loss of peris(a$le goods4*e W(ere t(e nature of t(e #or3 is suc( t(at t(eemployees (a)e to #or3 continuously for se)en *Adays in a #ee3 or more5 as in t(e case of t(e cre#mem$ers of a )essel to complete a )oyage and inot(er similar cases4 and*f W(en t(e #or3 is necessary to a)ail of fa)ora$le#eat(er or en)ironmental conditions #(ereperformance or ?uality of #or3 is dependent t(ereon.

No employee s(all $e re?uired against (is #ill to#or3 on (is sc(eduled rest day except undercircumstances pro)ided in t(is <ection: Pro)ided59o#e)er5 t(at #(ere an employee )olunteers to #or3on (is rest day under ot(er circumstances5 (e s(allexpress suc( desire in #riting5 su$ect to t(epro)isions of <ection A (ereof regarding additionalcompensation.

SECTION <. Co)"e$(a%o$ o$ !e(%day@S'$day@-olday. ] *a >xcept t(ose employeesreferred to under <ection 25 Rule 65 Boo3 (ree5 an

employee #(o is made or permitted to #or3 on (issc(eduled rest day s(all $e paid #it( an additionalcompensation of at least /0Q of (is regular #age. nemployee s(all $e entitled to suc( additionalcompensation for #or3 performed on a <unday only

#(en it is (is esta$lis(ed rest day.*$ W(ere t(e nature of t(e #or3 of t(e employee issuc( t(at (e (as no regular #or3 days and no regularrest days can $e sc(eduled5 (e s(all $e paid anadditional compensation of at least /0Q of (isregular #age for #or3 performed on <undays and(olidays.*c Wor3 performed on any special (oliday s(all $epaid #it( an additional compensation of at least /0Qof t(e regular #age of t(e employees. W(ere suc((oliday #or3 falls on t(e employeeZs sc(eduled restday5 (e s(all $e entitled to additional compensation

of at least ;0Q of (is regular #age.*d (e payment of additional compensation for #or3performed on regular (oliday s(all $e go)erned $yRule 65 Boo3 (ree5 of t(ese regulations.*e W(ere t(e collecti)e $argaining agreement orot(er applica$le employment contract stipulates t(epayment of a (ig(er premium pay t(an t(atprescri$ed under t(is <ection5 t(e employer s(all paysuc( (ig(er rate.

SECTION 5. Pad3o; day(. ] Not(ing in t(is Rules(all ustify an employer in reducing t(e

compensation of (is employees for t(e un#or3ed<undays5 (olidays5 or ot(er rest days #(ic( areconsidered paid-oK days or (olidays $y agreement orpractice su$sisting upon t(e eKecti)ity of t(e +ode.

SECTION =. Rela%o$ %o a*!ee)e$%(. ] Not(ing(erein s(all pre)ent t(e employer and (is employeesor t(eir representati)es in entering into anyagreement #it( terms more fa)ora$le to t(eemployees t(an t(ose pro)ided (erein5 or $e used todiminis( any $enet granted to t(e employees under

0




existing la#s5 agreements5 and )oluntary employerpractices.

RULE IHolday( %- Pay

SECTION 1. Co#e!a*e. ] (is rule s(all apply to allemployees except:*a (ose of t(e go)ernment and any of t(e politicalsu$di)ision5 including go)ernment-o#ned andcontrolled corporation4*$ (ose of retail and ser)ice esta$lis(mentsregularly employing less t(an ten *10 #or3ers4*c Comestic (elpers and persons in t(e personalser)ice of anot(er4*d =anagerial employees as dened in Boo3 (reeof t(e +ode4

*e Field personnel and ot(er employees #(ose timeand performance is unsuper)ised $y t(e employerincluding t(ose #(o are engaged on tas3 or contract$asis5 purely commission $asis5 or t(ose #(o arepaid a xed amount for performing #or3 irrespecti)eof t(e time consumed in t(e performance t(ereof.

SECTION 6. S%a%'( o, e)"loyee( "ad by %-e)o$%-. ] >mployees #(o are uniformly paid $y t(emont(5 irrespecti)e of t(e num$er of #or3ing dayst(erein5 #it( a salary of not less t(an t(e statutory oresta$lis(ed minimum #age s(all $e paid for all days

in t(e mont( #(et(er #or3ed or not.For t(is purpose5 t(e mont(ly minimum #age s(allnot $e less t(an t(e statutory minimum #agemultiplied $y /"; days di)ided $y t#el)e.

SECTION 7. Holday Pay. ] >)ery employer s(allpay (is employees t(eir regular daily #age for any#or3ed regular (olidays.s used in t(e rule5 t(e term Zregular (olidayZ s(allexclusi)ely refer to: Ne# EearZs Cay5 =aundy (ursday5 Good Friday5 t(e nint( of pril5 t(e rst of =ay5 t(e t#elft( of Dune5 t(e last <unday of ugust5

t(e t(irtiet( of No)em$er5 t(e t#enty-ft( andt(irtiet( of Cecem$er. Nation#ide special days s(allinclude t(e rst of No)em$er and t(e last day of Cecem$er.s used in t(is Rule legal or regular (oliday and

special (oliday s(all no# $e referred to as Zregular(olidayZ and Zspecial dayZ5 respecti)ely.

SECTION 8. Co)"e$(a%o$ ,o! -olday o!k. ]ny employee #(o is permitted or suKered to #or3on any regular (oliday5 not exceeding eig(t *&(ours5 s(all $e paid at least t#o (undred percent*200Q of (is regular daily #age. 6f t(e (oliday #or3falls on t(e sc(eduled rest day of t(e employee5 (es(all $e entitled to an additional premium pay of atleast /0Q of (is regular (oliday rate of 200Q $asedon (is regular #age rate.

SECTION 9. O#e!%)e "ay ,o! -olday o!k. ]For #or3 performed in excess of eig(t (ours on aregular (oliday5 an employee s(all $e paid anadditional compensation for t(e o)ertime #or3e?ui)alent to (is rate for t(e rst eig(t (ours on suc((oliday #or3 plus at least /0Q t(ereof.W(ere t(e regular (oliday #or3 exceeding eig(t(ours falls on t(e sc(eduled rest day of t(eemployee5 (e s(all $e paid an additionalcompensation for t(e o)ertime #or3 e?ui)alent to (isregular (oliday-rest day for t(e rst & (ours plus /0Q

t(ereof. (e regular (oliday rest day rate of anemployee s(all consist of 200Q of (is regular daily#age rate plus /0Q t(ereof.

SECTION . Ab(e$ce(. ] *a ll co)eredemployees s(all $e entitled to t(e $enet pro)ided(erein #(en t(ey are on lea)e of a$sence #it( pay.>mployees #(o are on lea)e of a$sence #it(out payon t(e day immediately preceding a regular (olidaymay not $e paid t(e re?uired (oliday pay if (e (asnot #or3ed on suc( regular (oliday.

1




*$ >mployees s(all grant t(e same percentage of t(e (oliday pay as t(e $enet granted $y competentaut(ority in t(e form of employeeZs compensation orsocial security payment5 #(ic(e)er is (ig(er5 if t(eyare not reporting for #or3 #(ile on suc( $enets.

*c W(ere t(e day immediately preceding t(e (olidayis a non-#or3ing day in t(e esta$lis(ment or t(esc(eduled rest day of t(e employee5 (e s(all not $edeemed to $e on lea)e of a$sence on t(at day5 in#(ic( case (e s(all $e entitled to t(e (oliday pay if (e #or3ed on t(e day immediately preceding t(enon-#or3ing day or rest day.

SECTION <. Te)"o!a!y o! "e!odc (-'%do$a$d %e)"o!a!y ce((a%o$ o, o!k. ] *a 6n casesof temporary or periodic s(utdo#n and temporarycessation of #or3 of an esta$lis(ment5 as #(en a

yearly in)entory or #(en t(e repair or cleaning of mac(ineries and e?uipment is underta3en5 t(eregular (olidays falling #it(in t(e period s(all $ecompensated in accordance #it( t(is Rule.*$ (e regular (oliday during t(e cessation of operation of an enterprise due to $usiness re)ersesas aut(oriHed $y t(e <ecretary of ,a$or and>mployment may not $e paid $y t(e employer.

SECTION 5. Holday "ay o, ce!%a$ e)"loyee(.] *a Pri)ate sc(ool teac(ers5 including facultymem$ers of colleges and uni)ersities5 may not $e

paid for t(e regular (olidays during semestral)acations. (ey s(all5 (o#e)er5 $e paid for t(eregular (olidays during +(ristmas )acation4*$ W(ere a co)ered employee5 is paid $y results oroutput5 suc( as payment on piece #or35 (is (olidaypay s(all not $e less t(an (is a)erage daily earningsfor t(e last se)en *A actual #or3ing days precedingt(e regular (oliday4 Pro)ided5 9o#e)er5 t(at in nocase s(all t(e (oliday pay $e less t(an t(e applica$lestatutory minimum #age rate.

*c <easonal #or3ers may not $e paid t(e re?uired(oliday pay during oK-season #(en t(ey are not at#or3.*d Wor3ers #(o (a)e no regular #or3ing days s(all$e entitled to t(e $enets pro)ided in t(is Rule.

SECTION =. Re*'la! -olday ,all$* o$ !e(% day(o! S'$day(. ] *a regular (oliday falling on t(eemployeeZs rest day s(all $e compensatedaccordingly.*$ W(ere a regular (oliday falls on a <unday5 t(efollo#ing day s(all $e considered a special (olidayfor purposes of t(e ,a$or +ode5 unless said day isalso a regular (oliday.

SECTION 1>. S'cce((#e !e*'la! -olday(. ]W(ere t(ere are t#o *2 successi)e regular (olidays5

li3e 9oly (ursday and Good Friday5 an employeemay not $e paid for $ot( (olidays if (e a$sents(imself from #or3 on t(e day immediately precedingt(e rst (oliday5 unless (e #or3s on t(e rst (oliday5in #(ic( case (e is entitled to (is (oliday pay on t(esecond (oliday.

SECTION 11. Rela%o$ %o a*!ee)e$%(. ] Not(ingin t(is Rule s(all ustify an employer in #it(dra#ingor reducing any $enets5 supplements or paymentsfor un#or3ed (olidays as pro)ided in existingindi)idual or collecti)e agreement or employer

practice or policy.

x------------------------------------x

1.'.2 ,ea)es1.'.2.1,er&ice /ncenti&e Lea&e

LC Art. @R*-% %o (e!#ce $ce$%#e lea#e.

2






SECTION 1. S-o!% T%le. - (is ct s(all $e 3no#n as t(e\Paternity ,ea)e ct of 1%%"\.

SECTION 6. Not#it(standing any la#5 rules and regulationsto t(e contrary5 e)ery married male employee in t(e pri)ate

and pu$lic sectors s(all $e entitled to a paternity lea)e of se)en *A days #it( full pay for t(e rst four *' deli)eries of t(e legitimate spouse #it( #(om (e is co(a$iting. (e maleemployee applying for paternity lea)e s(all notify (isemployer of t(e pregnancy of (is legitimate spouse and t(eexpected date of suc( deli)ery.

For purposes5 of t(is ct5 deli)ery s(all include c(ild$irt( orany miscarriage.

SECTION 7. De$%o$ o, Te!). - For purposes of t(is ct5Paternity ,ea)e refers to t(e $enets granted to a married

male employee allo#ing (im not to report for #or3 for se)en*A days $ut continues to earn t(e compensation t(erefor5on t(e condition t(at (is spouse (as deli)ered a c(ild orsuKered a miscarriage for purposes of ena$ling (im toeKecti)ely lend support to (is #ife in (er period of reco)eryandor in t(e nursing of t(e ne#ly-$orn c(ild.

SECTION 8. (e <ecretary of ,a$or and >mployment5 t(e+(airman of t(e +i)il <er)ice +ommission and t(e <ecretaryof 9ealt( s(all5 #it(in t(irty */0 days from t(e eKecti)ity oft(is ct5 issue suc( rules and regulations necessary for t(eproper implementation of t(e pro)isions (ereof.

SECTION 9. ny person5 corporation5 trust5 rm5partners(ip5 association or entity found )iolating t(is ct ort(e rules and regulations promulgated t(ereunder s(all $epunis(ed $y a ne not exceeding #enty-)e t(ousandpesos *P2;5000 or imprisonment of not less t(an t(irty*/0days nor more t(an six *" mont(s.

6f t(e )iolation is committed $y a corporation5 trust or rm5partners(ip5 association or any ot(er entity5 t(e penalty of imprisonment s(all $e imposed on t(e entityZs responsi$leoLcers5 including5 $ut not limited to5 t(e president5 )ice-

president5 c(ief executi)e oLcer5 general manager5managing director or partner directly responsi$le t(erefor.

SECTION . No$d)$'%o$ Cla'(e. - Not(ing in t(is cts(all $e construed to reduce any existing $enets of any

form granted under existing la#s5 decrees5 executi)eorders5 or anycontract agreement or policy $et#een employer andemployee.

x------------------------------------x

1.'.2./4aternity Lea&es

,ocial ,ecurity Law o# 1%SEC. 183A. Ma%e!$%y Lea#e Be$e%. - femalemem$er #(o (as paid at least t(ree */ mont(ly

contri$utions in t(e t#el)e-mont( periodimmediately preceding t(e semester of (er c(ild$irt(or miscarriage s(all $e paid a daily maternity $enete?ui)alent to one (undred percent *100Q of (era)erage daily salary credit for sixty *"0 days orse)enty-eig(t *A& days in case of caesarian deli)ery5su$ect to t(e follo#ing conditions:

*a (at t(e employee s(all (a)e notied (eremployer of (er pregnancy and t(e pro$a$le date of (er c(ild$irt(5 #(ic( notice s(all $e transmitted tot(e <<< in accordance #it( t(e rules and regulations

it may pro)ide4

*$ (e full payment s(all $e ad)anced $y t(eemployer #it(in t(irty */0 days from t(e ling of t(ematernity lea)e application4

*c (at payment of daily maternity $enets s(all $ea $ar to t(e reco)ery of sic3ness $enets pro)ided $yt(is ct for t(e same period for #(ic( daily maternity$enets (a)e $een recei)ed4

!




*d (at t(e maternity $enets pro)ided under t(issection s(all $e paid only for t(e rst four *'deli)eries or miscarriages4

*e (at t(e <<< s(all immediately reim$urse t(e

employer of one (undred percent *100Q of t(eamount of maternity $enets ad)anced to t(eemployee $y t(e employer upon receipt of satisfactory proof of suc( payment and legalityt(ereof4 and

*f (at if an employee mem$er s(ould gi)e $irt( orsuKer miscarriage #it(out t(e re?uired contri$utions(a)ing $een remitted for (er $y (er employer to t(e<<<5 or #it(out t(e latter (a)ing $een pre)iouslynotied $y t(e employer of t(e time of t(epregnancy5 t(e employer s(all pay to t(e <<<

damages e?ui)alent to t(e $enets #(ic( saidemployee mem$er #ould ot(er#ise (a)e $eenentitled to.

x------------------------------------x

1.'.2.',olo 'arentsI +el#are Act o# $000

RA O%$?-o ( co$(de!ed a( a (olo "a!e$%F

Isolo parentJ *pursuant to Repu$lic ct No. &%A25

also 3no#n as t(e I<olo Parents@ Welfare ct of 2000^ is any indi)idual #(o falls under any of t(efollo#ing categories:

*1 #oman #(o gi)es $irt( as a result of rape andot(er crimes against c(astity e)en #it(out a nalcon)iction of t(e oKender: Pro)ided5 (at t(e mot(er3eeps and raises t(e c(ild4

*2 Parent left solo or alone #it( t(e responsi$ility of parent(ood due to deat( of spouse4

*/ Parent left solo or alone #it( t(e responsi$ility of parent(ood #(ile t(e spouse is detained or is ser)ingsentence for a criminal con)iction for at least one *1year4

*' Parent left solo or alone #it( t(e responsi$ility of parent(ood due to p(ysical andor mental incapacityof spouse as certied $y a pu$lic medicalpractitioner4

*; Parent left solo or alone #it( t(e responsi$ility of parent(ood due to legal separation or de factoseparation from spouse for at least one *1 year5 aslong as (es(e is entrusted #it( t(e custody of t(ec(ildren4

*" Parent left solo or alone #it( t(e responsi$ility of

parent(ood due to declaration of nullity or annulmentof marriage as decreed $y a court or $y a c(urc( aslong as (es(e is entrusted #it( t(e custody of t(ec(ildren4

*A Parent left solo or alone #it( t(e responsi$ility of parent(ood due to a$andonment of spouse for atleast one *1 year4

*& nmarried mot(erfat(er #(o (as preferred to3eep and rear (er(is c(ildc(ildren instead of (a)ingot(ers care for t(em or gi)e t(em up to a #elfare

institution4

*% ny ot(er person #(o solely pro)ides parentalcare and support to a c(ild or c(ildren4

*10 ny family mem$er #(o assumes t(eresponsi$ility of (ead of family as a result of t(edeat(5 a$andonment5 disappearance or prolongeda$sence of t(e parents or solo parent.

c(ange in t(e status or circumstance of t(e parentclaiming $enets under Repu$lic ct No. &%A25 suc(

"






?-a% o%-e! be$e%( a!e a#alable %o (olo"a!e$%(F

<u$ect to income t(res(olds *Ipo)erty t(res(oldJset $y t(e National >conomic and Ce)elopment

ut(ority *N>C and su$ect to t(e assessment of t(e C<WC #or3er in t(e area5 Isolo parentsJ s(all $eentitled to t(e follo#ing:

>ducational $enets5 including sc(olars(ip programsfor ?ualied solo parents and t(eir c(ildren ininstitutions of $asic5 tertiary and tec(nicals3illseducation5 and nonformal education programsappropriate for solo parents and t(eir c(ildren.

9ousing $enets5 including allocation in go)ernmentlo#-cost (ousing proects5 #it( li$eral terms of

payment.

=edical assistance5 #it( compre(ensi)e (ealt( careprograms for solo parents and t(eir c(ildren to $eimplemented $y t(e C9 t(roug( t(eir retained(ospitals and medical centers and t(e localgo)ernment units *,Gs t(roug( t(eirpro)incialdistrictcitymunicipal (ospitals and rural(ealt( units *R9s.

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1.'.2.;,pecial Lea&e Bene!ts #or +omen

4agna Carta #or +omenSec%o$ 15. S"ecal Lea#e Be$e%( ,o! ?o)e$. - #oman employee (a)ing rendered continuousaggregate employment ser)ice of at least six *"mont(s for t(e last t#el)e *12 mont(s s(all $eentitled to a special lea)e $enet of t#o *2 mont(s#it( full pay $ased on (er gross mont(lycompensation follo#ing surgery caused $ygynecological disorders.

Rules 9 Regulations /mplementing 4agna Carta #or +omenSECTION 61. S"ecal Lea#e Be$e%( ,o!?o)e$

. ny female employee in t(e pu$lic and pri)ate

sector regardless of age and ci)il status s(all $eentitled to a special lea)e of t#o *2 mont(s #it(full pay $ased on (er gross mont(lycompensation su$ect to existing la#s5 rules andregulations due to surgery caused $ygynecological disorders under suc( terms andconditions:

1. <(e (as rendered at least six *" mont(scontinuous aggregate employment ser)ice fort(e last t#el)e *12 mont(s prior to surgery4

2. 6n t(e e)ent t(at an extended lea)e isnecessary5 t(e female employee may use (erearned lea)e credits4 and

/. (is special lea)e s(all $e non-cumulati)e andnoncon)erti$le to cas(.AA

B. (e +<+5 in t(e case of t(e pu$lic sector including,Gs and ot(er <tate agencies5 and t(e C,>5 int(e case of t(e pri)ate sector5 s(all issue furt(erguidelines and appropriate memorandumcirculars #it(in sixty *"0 days from t(e adoption

of t(ese Rules and Regulations to operationaliHesaid policy5 and monitor its implementation andact on any )iolations t(ereof.

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1.'.2."8ictims o# 8iolence Against +omen 9 Children

RA $$SECTION 87. E$%%led %o Lea#e. U ictims undert(is ct s(all $e entitled to ta3e a paid lea)e of a$sence up to ten *10 days in addition to ot(er paid

$




lea)es under t(e ,a$or +ode and +i)il <er)ice Rulesand Regulations5 extendi$le #(en t(e necessityarises as specied in t(e protection order.

ny employer #(o s(all preudice t(e rig(t of t(e

person under t(is section s(all $e penaliHed inaccordance #it( t(e pro)isions of t(e ,a$or +odeand +i)il <er)ice Rules and Regulations. ,i3e#ise5 anemployer #(o s(all preudice any person for assistinga co-employee #(o is a )ictim under t(is ct s(allli3e#ise $e lia$le for discrimination.

Rules 9 Regulations /mplementing RA $$Sec%o$ 86. Te$3day "ad lea#e $ add%o$ %oo%-e! lea#e be$e%(. - t any time during t(eapplication of any protection order5 in)estigation5prosecution andor trial of t(e criminal case5 a )ictim

of W+ #(o is employed s(all $e entitled to a paidlea)e of up to ten *10 days in addition to ot(er paidlea)es under t(e ,a$or +ode and +i)il <er)ice Rulesand Regulations and ot(er existing la#s andcompany policies5 extendi$le #(en t(e necessityarises as specied in t(e protection order. (ePunong Barangay3aga#ad or prosecutor or t(e +ler3of +ourt5 as t(e case may $e5 s(all issue acertication at no cost to t(e #oman t(at suc( anaction is pending5 and t(is is all t(at is re?uired fort(e employer to comply #it( t(e 10-day paid lea)e.For go)ernment employees5 in addition to t(e

aforementioned certication5 t(e employeeconcerned must le an application for lea)e citing as$asis R.. %2"2. (e administrati)e enforcement of t(is lea)e entitlement s(all $e considered #it(in t(e urisdiction of t(e Regional Cirector of t(e C,>under rticle 12% of t(e ,a$or +ode of t(eP(ilippines5 as amended5 for employees in t(epri)ate sector5 and t(e +i)il <er)ice +ommission5 forgo)ernment employees.

(e a)ailment of t(e ten day-lea)e s(all $e at t(eoption of t(e #oman employee5 #(ic( s(all co)er t(e

days t(at s(e (as to attend to medical and legalconcerns. ,ea)es not a)ailed of are noncumulati)eand not con)erti$le to cas(.

(e employeragency (ead #(o denies t(e

application for lea)e5 and #(o s(all preudice t(e)ictim-sur)i)or or any person for assisting a co-employee #(o is a )ictim-sur)i)or under t(e ct s(all$e (eld lia$le for discrimination and )iolation of R.%2"2.

(e pro)ision of t(e ,a$or +ode and t(e +i)il <er)iceRules and Regulations s(all go)ern t(e penalty to $eimposed on t(e said employeragency (ead.

x------------------------------------x

1.'.2.",ick Lea&e

PLDT # NLRCFacts:

• Pri)ate respondent #as employed as telep(one operator $utsu$se?uently dismissed from employment for a$sences#it(out aut(oriHed lea)e

• Respondent led a complaint for illegal dismissal allegingt(at petitioner dismissed (er despite (er presentation of medical certicates5 #(ic( #ere not (onored.

• Petitioner alleged t(at s(e (ad / unaut(oriHed a$sences int(e same year.

- 1st #as in =arc( #(en s(e allegedly (ad maritalpro$lems5 getting an 1& day suspension *% days a$sent x2 V 1&days

- 2nd #as in Dune #(en s(e #as allegedly suKering fromgastroenteritis5 $ut petitioner@s doctors only conrmedpart of (er sic3 lea)e5 as t(e medical certicate s(o#nonly co)ered t(e rst period of (er a$sence

- /rd #as end of Dune to Duly #(en s(e #as allegedlysuKering from )iral infection5 $ut (ad no la$examinations to pro)e suc(

• , ruled in fa)or of pri)ate respondent5 orderingreinstatement

%




- nly t(e 1st #as unaut(oriHed. (e su$se?uent ones#ere not necessarily unaut(oriHed a$sences5 as s(epresented medical certicates5 #(ic( #as t(e only t(ingre?uired. nd petitioner@s doctors #ere only assumingsituations $ased on t(eir opinion.

- <ic3 lea)es are considered unaut(oriHed only in t(e K cases:1. Forged doctor@s signature2. lteration of date or contents/. Facts stated in med cert are false'. Coctor is not ?ualied;. Patent falsities and misrepresentations". Patent a$use of sic3 lea)e pri)ileges

• N,R+ aLrmed ,

• + aLrmed N,R+

6ssue: WN respondent #as )alidly dismissed8

9eld: Ees. <(e #as )alidly dismissed for patent a$use of sic3 lea)epri)ileges.

>mployer )alidly esta$lis(ed t(at respondent repeatedlya$sented (erself from #or35 using t(e excuse of $eing sic3.Petitioner presented suLcient proof t(at t(e medicalcerticates #ere also not $elie)a$le5 $ased on t(e testimonyof its doctors. Respondent failed to pro)e ot(er#ise.

s respondent is in a position #(ic( is )ital to t(ecompany@s operations5 (er a$use of sic3 lea)e pri)ileges

$ecame a detriment to t(e company5 t(us ma3ing it a )aliddismissal.

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1.'./ 9olidays

RA OD*1 nless ot(er#ise modied $y la#5 order5 orproclamation5 t(e follo#ing regular (olidays andspecial days s(all $e o$ser)ed in t(e country:

*a Regular 9olidays

Ne# EearZs Cay - Danuary 1=aundy (ursday- =o)a$le CateGood Friday - =o)a$le Cate>idul Fitr - =o)a$le Cate>idul d(a- =o)a$le Cate

ra# ng Xagitingan*Bataan and +orregidor Cay - =ondaynearest pril %,a$or Cay - =onday nearest =ay 16ndependence Cay - =onday nearest Dune 12National 9eroes Cay - ,ast =onday of ugustBonifacio Cay - =onday nearest No)em$er /0+(ristmas Cay - Cecem$er 2;RiHal Cay - =onday nearest Cecem$er /0

*$ Nation#ide <pecial 9olidaysNinoy ?uino Cay- =onday nearest ugust 21ll <aints Cay - No)em$er 1

,ast Cay of t(e Eear - Cecem$er /1

*c 6n t(e e)ent t(e (oliday falls on a Wednesday5t(e (oliday #ill $e o$ser)ed on t(e =onday of t(e #ee3. 6f t(e (oliday falls on a <unday5 t(e(oliday #ill $e o$ser)ed on t(e =onday t(atfollo#s:

RA D$<ec. 2"5 Regular 9olidays and Nation#ide <pecialCays. U *1 nless ot(er#ise modied $y la#5 and orproclamation5 t(e follo#ing regular (olidays and

special days s(all $e o$ser)ed in t(e country:a Regular 9olidaysNe# year@s Cay - Danuary 1=aundy (ursday- =o)a$le dateGood Friday - =o)a$le date>idul Fitr - =o)a$le datera# ng Xagitingan*Bataaan and +orregidor Cay - =ondaynearest pril %,a$or Cay - =onday nearest =ay 16ndependence Cay - =onday nearest Dune12

&




National 9eroes Cay - ,ast =onday of ugustBonifacio Cay - =onday nearest No)em$er/0+(ristmas Cay - Cecem$er 2;

RiHal Cay - =onday nearest Cecem$er /0$ Nation#ide <pecial 9olidays:Ninoy ?uino Cay- =onday nearest ugust21ll <aints Cay - No)em$er 1,ast Cay of t(e Eear - Cecem$er /1

c 6n t(e e)ent t(e (oliday falls on a Wednesday5t(e (oliday #ill $e o$ser)ed on t(e =onday of t(e #ee3. 6f t(e (oliday falls on a <unday5 t(e(oliday #ill $e o$ser)ed on t(e =onday t(atfollo#s:

Pro)ided5 (at for mo)a$le (olidays5 t(ePresident s(all issue a proclamation5 at leastsix mont(s prior to t(e (oliday concerned5 t(especic date t(at s(all $e declared as anon#or3ing day:

Pro)ided5 (o#e)er5 (e >idul d(a s(all $ecele$rated as a regional (oliday in t(eutonomous Region in =uslim =indanao.

RA $@Sec%o$ 1. N$oy A'$o Day. - 6n order to

commemorate t(e deat( anni)ersary of Former<enator Benigno \Ninoy\ <. ?uino D.5 ugust t#enty-one of e)ery year is (ere$y declared as t(e Ninoy?uino Cay #(ic( s(all $e a national non#or3ing(oliday.

RA 1%%Sec%o$ 1. (e rst day of <(a##al5 t(e tent(mont( of t(e 6slamic calendar5 is (ere$y declared anational (oliday for t(e o$ser)ance of >idul Fitr5 andt(e tent( day of _(ul 9ia5 t(e t#elft( mont( of t(e6salamic calendar is (ere$y delared a regional

(oliday in t(e utonomous Region in =uslim=indanao *R== for t(e o$ser)ance of>idul d(a.>idul Fitr is t(e rst day mar3ing t(e end of t(e t(irty*/0-day fasting period of Ramad(an >idul d(ais atent( day in t(e mont( of 9a or 6slamic Pilgrimage

to =ecca #(erein =uslims pay (omage to $ra(amZssupreme act of sacrice and signies man3indZso$edience to God.

(e approximate date of t(ese 6slamic (olidays may$e determined in accordance #it( t(e 6slamiccalendar *9ira or t(e lunar calendar5 or upon 6slamicastronomical calculations5 #(ic(e)er is possi$le orcon)enient.

( $0 ;une 0 1O%<Re*'la! Holday(

Ne# EearZs Cay Danuary=aundy (ursday=o)a$le dateGood Friday =o)a$le datera# ng Xagitingan *Bataan and +orregidor Cay

pril %,a$or Cay =ay 16ndependence Cay Dune 12National 9eroes Cay ,ast <unday of ugustBonifacio Cay No)em$er /0+(ristmas Cay Cecem$er 2;RiHal Cay Cecem$er /0

Na%o$de S"ecal Day(ll <aints Cay No)em$er 1,ast Cay of t(e Eear Cecem$er /1

Sec. 6. 9encefort(5 t(e terms \legal or regular(oliday\ and \special (oliday\5 as used in la#s5orders5 rules and regulations or ot(er issuances s(allno# $e referred to as \regular (oliday\ and \specialday\5 respecti)ely.

'roclamation No. 1 ;*ecember $D $00O<. Regular 9olidays:

!0




ra# ng Xagitingan U pril " *=onday5 in lieu of pril %=aundy (ursday U pril %Good Friday U pril 10,a$or Cay U =ay 1 *Friday

6ndependence Cay U Dune 12 *FridayNational 9eroes Cay U ugust /1 *=onday5 last=onday of ugustBonifacio Cay U No)em$er /0 *=onday+(ristmas Cay U Cecem$er 2; *FridayRiHal Cay U Cecem$er /0 *Wednesday

B. <pecial *Non-Wor3ing CaysNinoy ?uino Cay U ugust 21 *Fridayll <aints Cay U No)em$er 1 *<undaydditional *non-#or3ing day U No)em$er 2*=onday

dditional *non-#or3ing day U Cecem$er 2'*(ursday,ast Cay of t(e Eear U Cecem$er /1 *(ursday

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1.; Formula for +omputing Wages

Rules /mplementing RA %$%Sec%o$ . S'**e(%ed +o!)'la $ De%e!)$$*%-e E'#ale$% Mo$%-ly S%a%'%o!y M$)')?a*e Ra%e(. ] Wit(out preudice to existing

company practices5 agreements or policies5 t(efollo#ing formula may $e used as guides indetermining t(e e?ui)alent mont(ly statutoryminimum #age rates:

a For t(ose #(o are re?uired to #or3 e)erydayincluding <undays or rest days5 special days andregular (olidays:>?ui)alent pplica$le daily #age rate=ont(ly V *CR x /%0.%0 days]]]]]]]]]Rate *>=R 12

W(ere /%0.%0 days V/02 days ] rdinary #or3ing days20 days ] 10 regular (olidays x 200Q""./0 days ] ;1 rest days x 1/0Q2."0 days ] 2 special days x 1/0Q

/%0.%0 days ] otal e?ui)alent num$er of days.

Note: For #or3ers #(ose rest days fall on <undays5t(e num$er of rest days in a year is reduced from ;2to ;1 days5 t(e last <unday of ugust $eing a regular(oliday under >xecuti)e rder No. 20/. For purposesof computation5 said (oliday5 alt(oug( still a rest dayfor t(em5 is included in t(e ten regular (olidays. For#or3ers #(ose rest days do not fall on <undays5 t(enum$er of rest days is ;2 days5 as t(ere are ;2#ee3s in a year.

*(L *epartment Ad&isory 1$01 ;4arch @ $010<

T!a$(3A(a NLRCFacts:

• Petitioners and Respondents entered into a +B #(ic(pro)ided t(at a 200Q (oliday pay #ould $e gi)en5 plus a"0Q premium.

• Petitioners re?uested for t(e payment of (oliday pay inarrears $ut #as not granted $y respondent

• Petitioner t(en led a complaint #it( t(e ,

6ssue: WN Respondents are lia$le for (oliday pay8

9eld: No. Respondents (a)e already incorporated t(e payment forlegal (olidays in t(e mont(ly salary of t(e employees.

Petitioners contend t(at t(eir mont(ly salaries did not (a)et(e allo#ance for t(e payment of legal (oliday pay5 asnot(ing in t(eir payslips indicated t(at suc( payment #asgi)en. 9o#e)er5 respondents contend t(at t(ey (a)e long$een using t(e I2&"-dayJ di)isor in computing for t(e

!1




employee@s o)ertime pay and daily rate deductions fora$sences.

;2 x '' V 2&" days &

#(ere ;2 V ! of #ee3s in a year'& V ! of #or3 (ours per #ee3& V !of #or3 (ours per day

2&" already ta3es into account t(e 10 legal (olidays in ayear5 as it only su$tracts t(e ;2 <undays and 2" <aturdays*employees are re?uired to #or3 day e)ery <aturday.9o#e)er5 t(e court still suggests t(at t(ere is a need toadust t(e 2&" day di)isor to 2&A for computations #(ic(#ould $e ad)antageous to t(e la$orer5 suc( as in computingt(e deductions for a$sences. 2&A di)isor is arri)ed at $y

ta3ing into account > 20/5 ta3ing into account 2 additionalspecial (olidays *all saints day 7 last day of t(e year andsu$tracting one legal (oliday *national (eroes day5 #(ic(al#ays falls on a <unday.

P!od'ce!( Ba$k # NLRCFacts:

• Respondents are employees of petitioner

• Respondents led a complaint against petitioner fordiminution of $enets and non-payment of (oliday pay


• N,R+ re)ersed

6ssue: WN respondents are entitled to $onuses8 N.WN 1/t( mont( pay #as diminis(ed8 N.

9eld: No. Respondents are not entitled to $onuses.

Respondents (a)e $een gi)en $onuses for t(e past 1/years5 as suc(5 t(ey reason t(at t(is (as already $ecome a)ested rig(t. 9o#e)er5 t(e petitioners are correct in pointingout t(at due to nancial losses and its present condition$eing under conser)ators(ip5 t(ey cannot $e compelled topay t(e alleged $onus diKerentials.

Bonuses are amounts granted and paid to an employee for(is industry and loyalty #(ic( contri$uted to t(e success of t(e $usiness. (is is a management prerogati)e assomet(ing gi)en in addition to #(at is ordinarily recei)ed $y

or strictly due to t(e recipient. (us5 it is not an enforcea$leor demanda$le o$ligation5 specially #(en t(e employer isalready experiencing deep nancial losses.

No. (e 1/t( mont( pay #as actually gi)en in t(e form of +(ristmas $onuses.

PC &;1 re?uired employers to pay all its employees #it($asic salary of not more t(an 15000 per mont( a 1/ t( mont(pay. 9o#e)er5 an exception #as granted in t(eimplementing rules suc( t(at if t(e employer is alreadygi)ing t(em ot(er form of $onuses #(ic( is not less t(an

112 of t(eir $asic salary5 t(is s(all $e construed as alreadygi)ing 1/t( mont( pay.

(mnibus Rules /mplementing the Labor Code Book ///SECTION 6. S%a%'( o, e)"loyee( "ad by %-e)o$%-. ] >mployees #(o are uniformly paid $y t(emont(5 irrespecti)e of t(e num$er of #or3ing dayst(erein5 #it( a salary of not less t(an t(e statutory oresta$lis(ed minimum #age s(all $e paid for all daysin t(e mont( #(et(er #or3ed or not.

For t(is purpose5 t(e mont(ly minimum #age s(all

not $e less t(an t(e statutory minimum #agemultiplied $y /"; days di)ided $y t#el)e.

Oda$*o # NLRCFacts:

• C,>5 upon routine inspection5 found t(at N>+employees (a)e $een under-paid.

• , ruled in fa)or of petitioners5 directing pri)ate respondentto pay t(e #age diKerentials- Based on <ec. 2 of implementing rules5 employees are

deemed paid for all t(e days in a mont(

!2




- Petitioners claim t(ey s(ould $e paid for all 10 legal(olidays5 un#or3ed (alf <aturdays and all of <undays.

- Petitioners #ere also gi)en credence #(en t(eymentioned t(at N>+ #as only using /0' as its di)isorin computing for lea)e credits5 t(us5 t(ey o#e petitioners

for #ages for "1 days5 t(e diKerence $et#een /"; and/0'5 as specied in <ec. 2• N,R+ re)ersed

- Caily #age rates of N>+ #ere a$o)e minimum #age- N,R+ applied computation in <ec. 2 *Wage x 12 /";- sing /0' as di)isor in computing for lea)e credits #as

more fa)ora$le since lo#er di)isor yields a (ig(er rate of pay.

• + dismissed for insuLciency in form and su$stance

6ssue: WN petitioners (a)e a rig(t to t(e #age diKerentiala#arded $y t(e ,8

9eld: No. N>+ does not need to pay petitioners t(e #agediKerential.

(e ,@s reliance on <ec. 2 of t(e 6mplementing Rules andPolicy 6nstructions No. % issued $y t(en =inister of ,a$or isfaulty. (e <+ (as long decided t(at suc( pro)ision is nulland )oid5 since in t(e guise of clarifying t(e ,+@s pro)isionson (oliday pay5 t(ey in eKect5 amended t(em $y enlargingt(e scope of t(e exclusion.

6t is clear t(at mont(ly paid employees are not exempted

from t(e $enets of (oliday pay5 $ut <ec. 2 pro)ided t(at its(all already $e presumed t(at t(ey are $eing paid (olidaypay5 #(et(er #or3ed or not. (is cannot $e t(e $asis of anyclaim5 as it is null and )oid.

(e $asic rule is Ino #or35 no payJ. (e rig(t to $e paid forun-#or3ed days is limited to t(e 10 legal (olidays in a year. (e use of /0' as a di)isor cannot mean t(at N>+ islia$le for underpayment. (e allo#a$le minimum di)isor isactually only 2&A. */"; U ;2 <undays U 2" <aturdays

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1." 1/t( =ont( Pay ,a#

'* O@1 ;as amended by 4emorandum (rder No. $O<1. Re)o#al o, Sala!y Cel$*.

n ugust 1/5 1%&"5 President +oraHon +. ?uinoissued =emorandum rder No. 2& #(ic( pro)idesas follo#s:

\<ection 1 of Presidential Cecree No. &;1 is(ere$y modied to t(e extent t(at all employersare (ere$y re?uired to pay all t(eir ran3-and-leemployees a 1/t( mont( pay not later t(anCecem$er 2' of e)ery year.\

Before its modication $y t(e aforecited=emorandum rder5 P.C. No. &;1 excludes from

entitlement to t(e 1/t( mont( pay t(oseemployees #(o #ere recei)ing a $asic salary of more t(an P15000.00 a mont(. Wit( t(e remo)alof t(e salary ceiling of P15000.005 all ran3 and leemployees are no# entitled to a 1/t( mont( payregardless of t(e amount of $asic salary t(at t(eyrecei)e in a mont( if t(eir employers are notot(er#ise exempted from t(e application of P.C.No. &;1. <uc( employees are entitled to t(e$enet regardless of t(eir designation oremployment status5 and irrespecti)e of t(emet(od $y #(ic( t(eir #ages are paid5 pro)ided

t(at t(ey (a)e #or3ed for at least one *1 mont(during a calendar year.

6. Ee)"%ed E)"loye!(. (e follo#ing employers are still not co)ered $yP.C. No. &;1:a. (e Go)ernment and any of its political

su$di)isions5 including go)ernment-o#nedand controlled corporations5 excepts t(osecorporations operating essentially as pri)atesu$sidiaries of t(e Go)ernment4

!




$. >mployers already paying t(eir employees a1/t( mont( pay or more in a calendar year orits e?ui)alent at t(e time of t(is issuance4

c. >mployers of (ouse(old (elpers and personsin t(e personal ser)ice of anot(er in relationto suc( #or3ers4 and

d. >mployers of t(ose #(o are paid on purelycommission5 $oundary5 or tas3 $asis5 andt(ose #(o are paid a xed amount forperforming specic #or35 irrespecti)e of t(etime consumed in t(e performance t(ereof5except #(ere t(e #or3ers are paid on piece-rate $asis in #(ic( case t(e employer s(allgrant t(e re?uired 1/t( mont( pay to suc(#or3ers.

s used (erein5 #or3ers paid on piece-rate$asis s(all refer to t(ose #(o are paid astandard amount for e)ery piece or unit of #or3 produced t(at is more or less regularlyreplicated5 #it(out regard to t(e time spent inproducing t(e same. (e term \its e?ui)alent\ as used onparagrap( *$ (ereof s(all include +(ristmas$onus5 mid-year $onus5 cas( $onuses andot(er payments amounting to not less t(an112 of t(e $asic salary $ut s(all not includecas( and stoc3 di)idends5 cost of li)ing

allo#ances and all ot(er allo#ances regularlyenoyed $y t(e employee5 as #ell as non-monetary $enets. W(ere an employer paysless t(an re?uired 112t( of t(e employees$asic salary5 t(e employer s(all pay t(ediKerence.

7. ?-o a!e Ra$k3a$d +le E)"loyee(.

(e ,a$or +ode distinguis(es a ran3-and-leemployee from a managerial employee. 6tpro)ides t(at a managerial employee is one #(ois )ested #it( po#ers of prerogati)es to lay do#n

and execute management policies andor to (ire5transfer5 suspend5 lay-oK5 recall disc(arge5 assignor discipline employees5 or to eKecti)elyrecommend suc( managerial actions. llemployees not falling #it(in t(is denition areconsidered ran3-and-le employees.

(e a$o)e distinction s(all $e used as guide fort(e purpose of determining #(o are ran3-and-leemployees entitled to t(e mandated 1/t( mont(pay.

8. A)o'$% a$d "ay)e$% o, 17%- Mo$%- Pay*a =inimum of t(e mount. ] (e minimum

1/t( mont( pay re?uired $y la# s(all not $eless t(an one-t#elft( of t(e total $asic salaryearned $y an employee #it(in a calendar

year. For t(e year 1%&A5 t(e computation of t(e 1/t( mont( pay s(all include t(e cost of li)ing allo#ances *+, integrated into t(e$asic salary of a co)ered employee pursuantto >xecuti)e rder 1A&.

>.. No. 1A& pro)ides5 among ot(er t(ings5t(at t(e P%.00 of t(e daily +, of P1A.00 fornon-agricultural #or3ers s(all $e integratedinto t(e $asic pay of co)ered employeeseKecti)e 1 =ay 1%&A5 and t(e remainingP&.00 eKecti)e 1 cto$er 1%&A. For

esta$lis(ments #it( less t(an /0 employeesand paid-up capital of P;005000 or less5 t(eintegration of +,s s(all $e as follo#s: P'.;0eKecti)e on 1 =ay 1%&A4 P'.;0 on 1 cto$er1%&A4 and P&.00 eKecti)e 1 Danuary 1%&&. (us5 in t(e computation of t(e 1/t( mont(pay for 1%&A5 t(e +,s integrated into t(e$asic pay s(all $e included as of t(e date of t(eir integration.

W(ere t(e total P1A.00 daily +, #asintegrated eKecti)e 1 =ay 1%&A or earlier t(e

!!




inclusion of said +, as part of t(e of t(e$asic pay for t(e purpose of computing t(e1/t( mont( pay s(all $e rec3oned from t(edate of actual integration.

(e \$asic salary\ of an employee for t(epurpose of computing t(e 1/t( mont( pays(all include all remunerations or earning paid$y t(is employer for ser)ices rendered $utdoes not include allo#ances and monetary$enets #(ic( are not considered orintegrated as part of t(e regular or $asicsalary5 suc( as t(e cas( e?ui)alent of unused)acation and sic3 lea)e credits5 o)ertime5premium5 nig(t diKerential and (oliday pay5and cost-of-li)ing allo#ances. 9o#e)er5 t(esesalary-related $enets s(ould $e included as

part of t(e $asic salary in t(e computation of t(e 1/t( mont( pay if $y indi)idual orcollecti)e agreement5 company practice orpolicy5 t(e same are treated as part of t(e$asic salary of t(e employees.

*$ ime of Payment. ] (e re?uired 1/t( mont(pay s(all $e paid not later t(an Cecem$er 2'of eac( year. n employer5 (o#e)er5 may gi)eto (is employees one (alf * of t(e re?uired1/t( mont( pay $efore t(e opening of t(eregular sc(ool year and t(e ot(er (alf on

$efore t(e 2't( of Cecem$er of e)ery year. (e fre?uency of payment of t(is monetary$enet may $e t(e su$ect of agreement$et#een t(e employer and t(erecogniHedcollecti)e $argaining agent of t(eemployees.

9. 17%- Mo$%- Pay ,o! Ce!%a$ Ty"e( o, E)"loyee(.*a >mployees Paid $y Results. ] >mployees #(o

are paid on piece #or3 $asis are $y la#entitled to t(e 1/t( mont( pay.

>mployees #(o are paid a xed orguaranteed #age plus commission are alsoentitled to t(e mandated 1/t( mont( pay5$ased on t(eir total earnings during t(ecalendar year5 i.e.5 on $ot( t(eir xed orguaranteed #age and commission.

*$ (ose #it( =ultiple >mployers. ]Go)ernment employees #or3ing part time in apri)ate enterprise5 including pri)ateeducational institutions5 as #ell as employees#or3ing in t#o or more pri)ate rms5 #(et(eron full or part time $asis5 are entitled to t(ere?uired 1/t( mont( pay from all t(eir pri)ateemployers regardless of t(eir total earningsfrom eac( or all t(eir employers.

*c Pri)ate <c(ool eac(ers. ] Pri)ate sc(oolteac(ers5 including faculty mem$ers of uni)ersities and colleges5 are entitled to t(ere?uired 1/t( mont( pay5 regardless of t(enum$er of mont(s t(ey teac( or are paid#it(in a year5 if t(ey (a)e rendered ser)icefor at least one *1 mont( #it(in a year.

. 17%- Mo$%- Pay o, Re(*$ed o! Se"a!a%edE)"loyee.n employee #(o (as resigned or #(ose ser)ices

#ere terminated at any time $efore t(e time forpayment of t(e 1/t( mont( pay is entitled to t(ismonetary $enet in proportion to t(e lengt( of time (e #or3ed during t(e year5 rec3oned fromt(e time (e started #or3ing during t(e calendaryear up to t(e time of (is resignation ortermination from t(e ser)ice. (us5 if (e #or3edonly from Danuary up to <eptem$er (isproportionate 1/t( mont( pay s(ould $ee?ui)alent of 112 (is total $asic salary (e earnedduring t(at period.

!"




(e payment of t(e 1/t( mont( pay may $edemanded $y t(e employee upon t(e cessationof employer-employee relations(ip. (is isconsistent #it( t(e principle of e?uity t(at as t(eemployer can re?uire t(e employee to clear(imself of all lia$ilit ies and propertyaccounta$ility5 so can t(e employee demand t(epayment of all $enets due (im upon t(etermination of t(e relations(ip.

<. No$3$cl'(o$ $ Re*'la! ?a*e. (e mandated 1/t( mont( pay need not $ecredited as part of regular #age of employees forpurposes of determining o)ertime and premiumpays5 fringe $enets insurance fund5 <ocial<ecurity5 =edicare and pri)ate retirement plans.

5. P!o-b%o$( a*a$(% !ed'c%o$ o!el)$a%o$ o, be$e%(.

Not(ing (erein s(all $e construed to aut(oriHeany employer to eliminate5 or diminis( in any#ay5 supplements5 or ot(er employee $enets orfa)ora$le practice $eing enoyed $y t(eemployee at t(e time of promulgation of t(isissuance.

Re&ised 6uidelines on the /mplementation o# 1th 4onth 'ay Law1. Re)o#al o, Sala!y Cel$*.

n ugust 1/5 1%&"5 President +oraHon +. ?uinoissued =emorandum rder No. 2& #(ic( pro)ides asfollo#s:

\<ection 1 of Presidential Cecree No. &;1 is (ere$ymodied to t(e extent t(at all employers are (ere$yre?uired to pay all t(eir ran3-and-le employees a1/t( mont( pay not later t(an Cecem$er 2' of e)eryyear.\c(an ro$les )irtual la# li$rary

Before its modication $y t(e aforecited=emorandum rder5 P.C. No. &;1 excludes fromentitlement to t(e 1/t( mont( pay t(ose employees#(o #ere recei)ing a $asic salary of more t(anP15000.00 a mont(. Wit( t(e remo)al of t(e salaryceiling of P15000.005 all ran3 and le employees areno# entitled to a 1/t( mont( pay regardless of t(eamount of $asic salary t(at t(ey recei)e in a mont( if t(eir employers are not ot(er#ise exempted from t(eapplication of P.C. No. &;1. <uc( employees areentitled to t(e $enet regardless of t(eir designationor employment status5 and irrespecti)e of t(emet(od $y #(ic( t(eir #ages are paid5 pro)ided t(att(ey (a)e #or3ed for at least one *1 mont( during acalendar year.

6. Ee)"%ed E)"loye!(.

(e follo#ing employers are still not co)ered $y P.C.No. &;1:

a. (e Go)ernment and any of its politicalsu$di)isions5 including go)ernment-o#ned andcontrolled corporations5 excepts t(ose corporationsoperating essentially as pri)ate su$sidiaries of t(eGo)ernment4

$. >mployers already paying t(eir employees a 1/t(mont( pay or more in a calendar year or its

e?ui)alent at t(e time of t(is issuance4

c. >mployers of (ouse(old (elpers and persons int(e personal ser)ice of anot(er in relation to suc(#or3ers4 and

d. >mployers of t(ose #(o are paid on purelycommission5 $oundary5 or tas3 $asis5 and t(ose #(oare paid a xed amount for performing specic #or35irrespecti)e of t(e time consumed in t(eperformance t(ereof5 except #(ere t(e #or3ers arepaid on piece-rate $asis in #(ic( case t(e employer

!#




s(all grant t(e re?uired 1/t( mont( pay to suc(#or3ers.

s used (erein5 #or3ers paid on piece-rate $asis s(allrefer to t(ose #(o are paid a standard amount fore)ery piece or unit of #or3 produced t(at is more orless regularly replicated5 #it(out regard to t(e timespent in producing t(e same.

(e term \its e?ui)alent\ as used on paragrap( *$(ereof s(all include +(ristmas $onus5 mid-year$onus5 cas( $onuses and ot(er payments amountingto not less t(an 112 of t(e $asic salary $ut s(all notinclude cas( and stoc3 di)idends5 cost of li)ingallo#ances and all ot(er allo#ances regularlyenoyed $y t(e employee5 as #ell as non-monetary$enets. W(ere an employer pays less t(an re?uired112t( of t(e employees $asic salary5 t(e employers(all pay t(e diKerence.c(an ro$les )irtual la#li$rary

7. ?-o a!e Ra$k3a$d +le E)"loyee(.

(e ,a$or +ode distinguis(es a ran3-and-leemployee from a managerial employee. 6t pro)idest(at a managerial employee is one #(o is )ested#it( po#ers of prerogati)es to lay do#n and executemanagement policies andor to (ire5 transfer5suspend5 lay-oK5 recall disc(arge5 assign or discipline

employees5 or to eKecti)ely recommend suc(managerial actions. ll employees not falling #it(int(is denition are considered ran3-and-leemployees.

(e a$o)e distinction s(all $e used as guide for t(epurpose of determining #(o are ran3-and-leemployees entitled to t(e mandated 1/t( mont( pay.

8. A)o'$% a$d "ay)e$% o, 17%- Mo$%- Pay

*a =inimum of t(e mount. ] (e minimum 1/t(mont( pay re?uired $y la# s(all not $e less t(anone-t#elft( of t(e total $asic salary earned $y anemployee #it(in a calendar year. For t(e year 1%&A5t(e computation of t(e 1/t( mont( pay s(all includet(e cost of li)ing allo#ances *+, integrated intot(e $asic salary of a co)ered employee pursuant to>xecuti)e rder 1A&.

>.. No. 1A& pro)ides5 among ot(er t(ings5 t(at t(eP%.00 of t(e daily +, of P1A.00 for non-agricultural#or3ers s(all $e integrated into t(e $asic pay of co)ered employees eKecti)e 1 =ay 1%&A5 and t(eremaining P&.00 eKecti)e 1 cto$er 1%&A. Foresta$lis(ments #it( less t(an /0 employees andpaid-up capital of P;005000 or less5 t(e integration of +,s s(all $e as follo#s: P'.;0 eKecti)e on 1 =ay1%&A4 P'.;0 on 1 cto$er 1%&A4 and P&.00 eKecti)e1 Danuary 1%&&. (us5 in t(e computation of t(e 1/t(mont( pay for 1%&A5 t(e +,s integrated into t(e$asic pay s(all $e included as of t(e date of t(eirintegration.

W(ere t(e total P1A.00 daily +, #as integratedeKecti)e 1 =ay 1%&A or earlier t(e inclusion of said+, as part of t(e of t(e $asic pay for t(e purposeof computing t(e 1/t( mont( pay s(all $e rec3onedfrom t(e date of actual integration.

(e \$asic salary\ of an employee for t(e purpose of computing t(e 1/t( mont( pay s(all include allremunerations or earning paid $y t(is employer forser)ices rendered $ut does not include allo#ancesand monetary $enets #(ic( are not considered orintegrated as part of t(e regular or $asic salary5 suc(as t(e cas( e?ui)alent of unused )acation and sic3lea)e credits5 o)ertime5 premium5 nig(t diKerentialand (oliday pay5 and cost-of-li)ing allo#ances.9o#e)er5 t(ese salary-related $enets s(ould $eincluded as part of t(e $asic salary in t(ecomputation of t(e 1/t( mont( pay if $y indi)idual or

!$




collecti)e agreement5 company practice or policy5t(e same are treated as part of t(e $asic salary of t(e employees.

*$ ime of Payment. ] (e re?uired 1/t( mont(pay s(all $e paid not later t(an Cecem$er 2' of eac(year. n employer5 (o#e)er5 may gi)e to (isemployees one (alf * of t(e re?uired 1/t( mont(pay $efore t(e opening of t(e regular sc(ool yearand t(e ot(er (alf on $efore t(e 2't( of Cecem$er of e)ery year. (e fre?uency of payment of t(ismonetary $enet may $e t(e su$ect of agreement$et#een t(e employer and t(e recogniHedcollecti)e$argaining agent of t(e employees.

9. 17%- Mo$%- Pay ,o! Ce!%a$ Ty"e( o, E)"loyee(.

*a >mployees Paid $y Results. ] >mployees #(oare paid on piece #or3 $asis are $y la# entitled tot(e 1/t( mont( pay.

>mployees #(o are paid a xed or guaranteed #ageplus commission are also entitled to t(e mandated1/t( mont( pay5 $ased on t(eir total earnings duringt(e calendar year5 i.e.5 on $ot( t(eir xed orguaranteed #age and commission.

*$ (ose #it( =ultiple >mployers. ] Go)ernment

employees #or3ing part time in a pri)ate enterprise5including pri)ate educational institutions5 as #ell asemployees #or3ing in t#o or more pri)ate rms5#(et(er on full or part time $asis5 are entitled to t(ere?uired 1/t( mont( pay from all t(eir pri)ateemployers regardless of t(eir total earnings fromeac( or all t(eir employers.c(an ro$les )irtual la#li$rary

*c Pri)ate <c(ool eac(ers. ] Pri)ate sc(oolteac(ers5 including faculty mem$ers of uni)ersitiesand colleges5 are entitled to t(e re?uired 1/t( mont(

pay5 regardless of t(e num$er of mont(s t(ey teac(or are paid #it(in a year5 if t(ey (a)e renderedser)ice for at least one *1 mont( #it(in a year.

. 17%- Mo$%- Pay o, Re(*$ed o! Se"a!a%edE)"loyee.

n employee #(o (as resigned or #(ose ser)ices#ere terminated at any time $efore t(e time forpayment of t(e 1/t( mont( pay is entitled to t(ismonetary $enet in proportion to t(e lengt( of time(e #or3ed during t(e year5 rec3oned from t(e time(e started #or3ing during t(e calendar year up tot(e time of (is resignation or termination from t(eser)ice. (us5 if (e #or3ed only from Danuary up to<eptem$er (is proportionate 1/t( mont( pay s(ould$e e?ui)alent of 112 (is total $asic salary (e earnedduring t(at period.

(e payment of t(e 1/t( mont( pay may $edemanded $y t(e employee upon t(e cessation of employer-employee relations(ip. (is is consistent#it( t(e principle of e?uity t(at as t(e employer canre?uire t(e employee to clear (imself of all lia$ilitiesand property accounta$ility5 so can t(e employeedemand t(e payment of all $enets due (im upont(e termination of t(e relations(ip.

<. No$3$cl'(o$ $ Re*'la! ?a*e.

(e mandated 1/t( mont( pay need not $e creditedas part of regular #age of employees for purposes of determining o)ertime and premium pays5 fringe$enets insurance fund5 <ocial <ecurity5 =edicareand pri)ate retirement plans.

5. P!o-b%o$( a*a$(% !ed'c%o$ o!el)$a%o$ o, be$e%(. c-a$ !oble( #!%'al lalb!a!y

!%




Not(ing (erein s(all $e construed to aut(oriHe anyemployer to eliminate5 or diminis( in any #ay5supplements5 or ot(er employee $enets orfa)ora$le practice $eing enoyed $y t(e employee att(e time of promulgation of t(is issuance.

P-l""$e D'"lca%o!( # NLRCFacts:

• <+ /rd Ci)ision dismissed petition for certiorari $y Petitioner5aLrming , 7 N,R+ decision directing Petitioner to pay 1/ t(

mont( pay $ased on $asic salary P,< sales commission• =R #as su$se?uently denied

• Petitioners led =otion for ,ea)e to admit 2nd =R

• Petitioner in)o3ed recent ruling on Boie-a3eda5 #(ere <+ 2nd

Ci)ision declared null and )oid t(e 2nd paragrap( of <ec ;*aof Re)ised Guidelines issued $y <ec. Crilon- >mployers are re?uired to pay 1/t( mont( $ased on total

earnings: xed #age and commission• Petitioners a)er t(at t(is ruling #as opposite to t(e

conclusion reac(ed in its case.

6ssue: WN t(e Boie-a3eda ruling a$andoned t(e pre)ious decisionin Petitioner@s case8

9eld: No. Boie-a3eda issue is not t(e same as Petitioner@s.

+ommission a referred to in t(e Boie-a3eda ruling isdiKerent from t(at in Petitioner@s case. /rd Ci)ision foundt(at t(e sales commissions gi)en $y Petitioner to its

employees actually formed part of t(eir xed or $asic#ages5 so as to include it in t(e computation of 1/ t( mont(pay. (ese sales commissions formed an integral part of t(e$asic salary structure. lt(oug( it #as used to moti)ateemployees to do $etter5 it still formed part of t(eir $asic#age.

6n Boie-a3eda5 t(e commissions #ere not considered as partof t(e $asic #age5 as t(ese #ere paid to t(e employees asproducti)ity $onuses5 #(ic( #ere dependent on t(e successof t(e company5 and not of t(e indi)idual. <imilar to prots(aring payments5 t(ese do not form part of t(e $asic #age.

Furt(er5 =edical Representati)es in Boie-a3eda are not t(esame as <alesmen in Cuplicators. (ey do not eKect anysale of article5 $ut merely promote suc( products. <(ouldt(e company earn from t(eir promotions5 t(ey #ill t(en $egi)en $onuses5 $ut suc( is still dependent on t(e company@sprota$ility.

W(at t(e 2nd Ci)ision ruled #as t(at t(ose additionalpayments made to employees5 #(ic( parta3e in t(e natureof prot-s(aring payments5 are properly excluded as part of t(e $asic salary. 6t struc3 do#n t(e 2 nd paragrap( of <ec ;*aas (a)ing no legal $asis for including #it(in t(e termcommission t(ose additional payments5 #(ic( are5 in fact5prot s(aring payments. 9o#e)er5 to t(e extent of t(edoctrine laid do#n in Cuplicators5 #(erein t(e commissionrefers to t(ose directly dependent on t(e extent anemployee exerts (imself5 suc( still remains )alid.

PAL # PALEAFacts:

• P, 7 P,> entered into a +B in 1%&A.- 1/t( mont( pay to $e paid in ad)ance in =ay- +(ristmas $onus staggered in 2 stages

• Prior to payment of 1/t( mont(5 P, released guidelines- Ci)iding t(e groups into t(ose already regulariHed and

t(ose #(o are not- (ose #(o are not s(all recei)e t(eir 1/ t( mont( pay on

or $efore Cecem$er 2'5 and s(all $e paid t(e e?ui)alentof not less t(an mont( of t(eir $asic mont(ly salary

#it(in t(e calendar year• P,> contended t(at all employees #(et(er regular or not

s(ould $e recei)ing t(eir 1/t( mont( pay on =ay• P, a)erred t(at t(ose not regulariHed are not entitled to

1/t( mont( pay yet5 as t(ey (a)e already recei)ed t(eir+(ristmas $onus pursuant to said guidelines- (is #as also pursuant to PC &;15 #(ic( stated t(at

t(ose already paying t(e e?ui)alent of 1/t( mont( pays(all $e exempted from furt(er paying t(e 1/ t( mont(pay

- P, stated t(at its e?ui)alent referred to t(e +(ristmas$onus already gi)en

!&




• , dismissed P,>@s petition

• N,R+ re)ersed ,- 1/t( mont( pay or mid-year $onus is distinct from

+(ristmas $onus• + dismissed P,@s Petition for Re)ie# of +ertiorari

•Proceedings #ere suspended #(en P, #ent intore(a$ilitation $ut re)i)ed as soon as its operations #eresta$iliHed

6ssue: WN P, is lia$le to pay t(e 1/t( mont( pay to t(oseregulariHed after t(e guidelines #ere issued $y P,8 E><.WN 1/t( mont( pay or mid-year $onus can $e e?uated to+(ristmas $onus8 N.

9eld: Ees. P, s(ould still pay t(em 1/t( mont( pay.

(e +B entered into actually referred to all employees in

t(e $argaining unit5 #it(out distinction as to #(et(er t(ey#ere regular or non-regular employees. ll employees in P,are entitled to t(e same $enets. >)en t(ose not $elongingto t(e c(osen $argaining la$or organiHation are included int(e enoyment of t(e $enets5 so long as t(ey are in t(esame $argaining unit.

No. Cespite payment of +(ristmas $onus5 employer is stilllia$le for 1/t( mont( pay.

lt(oug( PC&;1 exempts t(ose already paying 1/t( mont(or its e?ui)alent from furt(er paying 1/t( mont( pay again5

suc( still does not exempt P,. W(en P, entered into t(e+B #it( P,>5 t(ey specically agreed t(at t(ey #ouldpay B9 t(e 1/t( mont( pay or mid-year $onus NC t(e+(ristmas $onus. P, cannot unilaterally declare t(at non-regular employees cannot enoy t(e $enets of t(e +B. 6f t(e +(ristmas $onus #as intended to include t(e 1/ t( mont(pay5 t(en t(ere s(ould ne)er (a)e $een a separatepro)ision for suc( in t(e +B.

Ce$%!al A'ca!e!a # Ce$%!al A'ca!e!a U$o$Facts:

• Pursuant to PC&;15 Petitioner granted 1/t( mont( pay to itsemployees

• <uc( #as computed $y di)iding total $asic annual salary $y12.

• Basic salary included $asic mont(ly salary5 1st & (ours

o)ertime pay on <unday and (oliday5 nig(t premium pay5)acation lea)es 7 sic3 lea)es.• Petitioner used t(is computation from 1%A; to 200".

• 6n 200'5 Respondents staged a stri3e5 #(ic( causedtemporary cessation of operations5 $ut su$se?uently endedin 200;.

• n pril-=ay 200"5 t(ere #as anot(er stri3e5 #(ic( againcaused a temporary cessation of operations5 t(enemployees #ere allo#ed to report for #or3 starting Dune ona 1;-day per mont( rotation $asis5 #(ic( lasted until<eptem$er.

• W(en employees #ere gi)en t(eir 1/t( mont( pay5 t(ey

a)erred t(at it s(ould (a)e $een di)ided $y &5 since t(eyonly #or3ed for a total of & mont(s5 and not 12.

• Petitioner a)erred t(at it #as merely correcting a mista3e5#(erein t(e 1/t( mont( pay s(ould only (a)e included t(e$asic mont(ly pay5 and not t(e ot(er $enets.

• , ruled in fa)or of Petitioners

• N,R+ re)ersed

• + aLrmed N,R+

6ssue: WN Petitioners are lia$le for t(e #age diKerential in 1/t(

mont( pay8

9eld: Ees. Petitioners must pay respondent t(e #age diKerential.

Petitioner cannot no# complain t(at only after /0 years5t(ey are correcting an error. PC &;1 #as issued5 specifyingt(at $asic salary s(all $e used in computing t(e 1/t( mont(pay. 6ts supplementary rules #ere issued5 specically statingt(at ot(er remunerations s(all not $e included in t(ecomputation5 suc( as unused )acation lea)e credits5o)ertime pay5 etc.

"0




Cespite suc( guidelines5 petitioner still c(ose to pay 1/ t(

mont( using t(e computation5 #(ic( included o)ertime pay5)acation lea)e5 sic3 lea)e5 etc. (is #as done for almost /0years. 6t (as already ripened into company practice5 and assuc(5 cannot $e unilaterally #it(dra#n. (ere #as nodou$tful ?uestion of la#5 #(erein #(ic( petitioner can $ase(is error on. (us5 petitioner s(all $e lia$le to pay t(e #agediKerential.

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6. BASIC INCOME TA ON INDIIDUAL CITIENS

National /nternal Re&enue Code ;amended by RA @0D<

SEC. 68. I$co)e Ta Ra%e( -* Rates of 6ncome ax on 6ndi)idual +itiHen and

6ndi)idual Resident lien of t(e P(ilippines.

*1 n income tax is (ere$y imposed:*a n t(e taxa$le income dened in

<ection /1 of t(is +ode5 ot(er t(anincome su$ect to tax under<u$sections *B5 *+ and *C of t(is<ection5 deri)ed for eac( taxa$le yearfrom all sources #it(in and #it(out t(eP(ilippines $e e)ery indi)idual citiHenof t(e P(ilippines residing t(erein4

*$ n t(e taxa$le income dened in<ection /1 of t(is +ode5 ot(er t(anincome su$ect to tax under<u$sections *B5 *+ and *C of t(is<ection5 deri)ed for eac( taxa$le yearfrom all sources #it(in t(e P(ilippines$y an indi)idual citiHen of t(eP(ilippines #(o is residing outside of t(e P(ilippines including o)erseascontract #or3ers referred to in<u$section*+ of <ection 2/ (ereof4and

*c n t(e taxa$le income dened in<ection /1 of t(is code5 ot(er t(anincome su$ect to tax under<u$sections *B5 *+ and *C of t(is<ection5 deri)ed for eac( taxa$le yearfrom all sources #it(in t(e P(ilippines$y an indi)idual alien #(o is a residentof t(e P(ilippines.

*2 Rates of ax on axa$le 6ncome of 6ndi)iduals. - (e tax s(all $ecomputed in accordance #it( and att(e rates esta$lis(ed in t(e follo#ingsc(edule:

Not o)er P105000V ;Q

)er P105000 $ut not o)er P/05000V P;00`10Q of excess o)er

P105000)er P/05000 $ut not o)er PA05000

V P25;00`1;Q of t(e excess o)erP/05000

)er PA05000 $ut not o)er P1'05000V P&5;00`20Q of t(e excess o)er

PA05000)er P1'05000 $ut not o)er P2;05000

V P225;00`2;Q of t(e excesso)er P1'05000

)er P2;05000 $ut not o)er P;005000V P;05000`/0Q of t(e excess

o)er P2;05000)er P;005000

V P12;5000`/2Q of t(e excesso)er P;005000

For married indi)iduals5 t(e (us$andand #ife5 su$ect to t(e pro)ision of <ection ;1 *C (ereof5 s(all computeseparately t(eir indi)idual income tax$ased on t(eir respecti)e total taxa$leincome: Pro)ided5 t(at if any income

"1

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cannot $e denitely attri$uted to oridentied as income exclusi)ely earnedor realiHed $y eit(er of t(e spouses5t(e same s(all $e di)ided e?ually$et#een t(e spouses for t(e purposeof determining t(eir respecti)e taxa$leincome.

Pro)ided5 (at minimum #age earnersas dened in <ection 22 *99 of t(is+ode s(all $e exempt from t(epayment of income tax on t(eirtaxa$le income: Pro)ided5 furt(er5 (att(e (oliday pay5 o)ertime pay5 nig(ts(ift diKerential pay and (aHard payrecei)ed $y suc( minimum #ageearners s(all li3e#ise $e exempt fromincome tax.

*B Rate of ax on +ertain Passi)e 6ncome.*1 6nterests5 Royalties5 PriHes5 and t(er

Winnings. - nal tax at t(e rate of t#enty percent *20Q is (ere$y imposedupon t(e amount of interest from anycurrency $an3 deposit and yield or anyot(er monetary $enet from depositsu$stitutes and from trust funds andsimilar arrangements4 royalties5 except on$oo3s5 as #ell as ot(er literary #or3s andmusical compositions5 #(ic( s(all $eimposed a nal tax of ten percent *10Q4priHes *except priHes amounting to ent(ousand pesos *P105000 or less #(ic(s(all $e su$ect to tax under <u$section* of <ection 2'4 and ot(er #innings*except P(ilippine +(arity <#eepsta3esand ,otto #innings5 deri)ed from sources#it(in t(e P(ilippines: Pro)ided5 (o#e)er5 (at interest income recei)ed $y anindi)idual taxpayer *except a nonresidentindi)idual from a depository $an3 under

t(e expanded foreign currency depositsystem s(all $e su$ect to a nal incometax at t(e rate of se)en and one-(alf percent *A 12Q of suc( interest income:Pro)ided5 furt(er5 (at interest incomefrom long-term deposit or in)estment int(e form of sa)ings5 common or indi)idualtrust funds5 deposit su$stitutes5in)estment management accounts andot(er in)estments e)idenced $ycerticates in suc( form prescri$ed $y t(eBang3o <entral ng Pilipinas *B<P s(all $eexempt from t(e tax imposed under t(is<u$section: Pro)ided5 nally5 (at s(ouldt(e (older of t(e certicate pre-terminatet(e deposit or in)estment $efore t(e ft(*;t( year5 a nal tax s(all $e imposed ont(e entire income and s(all $e deductedand #it((eld $y t(e depository $an3 fromt(e proceeds of t(e long-term deposit orin)estment certicate $ased on t(eremaining maturity t(ereof:

Four *' years to less t(an )e *; years -;Q4 (ree */ years to less t(an *' years -12Q4 and,ess t(an t(ree */ years - 20Q

*2 +as( andor Property Ci)idends - naltax at t(e follo#ing rates s(all $e imposedupon t(e cas( andor property di)idendsactually or constructi)ely recei)ed $y anindi)idual from a domestic corporation orfrom a oint stoc3 company5 insurance ormutual fund companies and regionaloperating (ead?uarters of multinationalcompanies5 or on t(e s(are of anindi)idual in t(e distri$uta$le net incomeafter tax of a partners(ip *except ageneral professional partners(ip of #(ic(

"2

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(e is a partner5 or on t(e s(are of anindi)idual in t(e net income after tax of anassociation5 a oint account5 or a oint)enture or consortium taxa$le as acorporation of #(ic( (e is a mem$er or co-)enturer:

<ix percent *"Q $eginning Danuary 151%%&4>ig(t percent *&Q $eginning Danuary 151%%%4 and en percent *10Q $eginning Danuary 152000.

Pro)ided5 (o#e)er5 (at t(e tax ondi)idends s(all apply only on incomeearned on or after Danuary 15 1%%&.6ncome forming part of retained earningsas of Cecem$er /15 1%%A s(all not5 e)en if declared or distri$uted on or after Danuary15 1%%&5 $e su$ect to t(is tax.

*+ +apital Gains from <ale of <(ares of <toc3 not raded in t(e <toc3 >xc(ange. - (epro)isions of <ection /%*B not#it(standing5 anal tax at t(e rates prescri$ed $elo# is(ere$y imposed upon t(e net capital gainsrealiHed during t(e taxa$le year from t(e sale5$arter5 exc(ange or ot(er disposition of s(ares of stoc3 in a domestic corporation5except s(ares sold5 or disposed of t(roug( t(estoc3 exc(ange.

Not o)er P1005000........;Q

n any amount in excess of P100500010Q

*C +apital Gains from <ale of Real Property. -*1 6n General. - (e pro)isions of <ection

/%*B not#it(standing5 a nal tax of six

percent *"Q $ased on t(e gross sellingprice or current fair mar3et )alue asdetermined in accordance #it( <ection"*> of t(is +ode5 #(ic(e)er is (ig(er5 is(ere$y imposed upon capital gainspresumed to (a)e $een realiHed from t(esale5 exc(ange5 or ot(er disposition of realproperty located in t(e P(ilippines5classied as capital assets5 including pactode retro sales and ot(er forms of conditional sales5 $y indi)iduals5 includingestates and trusts: Pro)ided5 (at t(e taxlia$ility5 if any5 on gains from sales orot(er dispositions of real property to t(ego)ernment or any of its politicalsu$di)isions or agencies or togo)ernment-o#ned or controlledcorporations s(all $e determined eit(erunder <ection 2' * or under t(is<u$section5 at t(e option of t(e taxpayer.

*2 >xception. - (e pro)isions of paragrap(*1 of t(is <u$section to t(e contrarynot#it(standing5 capital gains presumedto (a)e $een realiHed from t(e sale ordisposition of t(eir principal residence $ynatural persons5 t(e proceeds of #(ic( isfully utiliHed in ac?uiring or constructing ane# principal residence #it(in eig(teen*1& calendar mont(s from t(e date of sale or disposition5 s(all $e exempt fromt(e capital gains tax imposed under t(is<u$section: Pro)ided5 (at t(e (istoricalcost or adusted $asis of t(e real propertysold or disposed s(all $e carried o)er tot(e ne# principal residence $uilt orac?uired: Pro)ided5 furt(er5 (at t(e+ommissioner s(all (a)e $een dulynotied $y t(e taxpayer #it(in t(irty */0days from t(e date of sale or dispositiont(roug( a prescri$ed return of (is

"

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intention to a)ail of t(e tax exemption(erein mentioned: Pro)ided5 still furt(er5 (at t(e said tax exemption can only $ea)ailed of once e)ery ten *10 years:Pro)ided5 nally5 t(at if t(ere is no fullutiliHation of t(e proceeds of sale ordisposition5 t(e portion of t(e gainpresumed to (a)e $een realiHed from t(esale or disposition s(all $e su$ect tocapital gains tax. For t(is purpose5 t(egross selling price or fair mar3et )alue att(e time of sale5 #(ic(e)er is (ig(er5 s(all$e multiplied $y a fraction #(ic( t(eunutiliHed amount $ears to t(e grossselling price in order to determine t(etaxa$le portion and t(e tax prescri$edunder paragrap( *1 of t(is <u$sections(all $e imposed t(ereon.

SEC. 76. G!o(( I$co)e 3* General Cenition. - >xcept #(en ot(er#ise

pro)ided in t(is itle5 gross income means allincome deri)ed from #(ate)er source5including *$ut not limited to t(e follo#ingitems:

*1 +ompensation for ser)ices in #(ate)erform paid5 including5 $ut not limited tofees5 salaries5 #ages5 commissions5 andsimilar items4

*2 Gross income deri)ed from t(e conduct of trade or $usiness or t(e exercise of aprofession4

*/ Gains deri)ed from dealings in property4*' 6nterests4*; Rents4*" Royalties4*A Ci)idends4*& nnuities4*% PriHes and #innings4*10 Pensions4 and

*11 PartnerZs distri$uti)e s(are from t(e netincome of t(e general professionalpartners(ip.

*B >xclusions from Gross 6ncome. - (e follo#ingitems s(all not $e included in gross incomeand s(all $e exempt from taxation under t(istitle:*1 ,ife 6nsurance. - (e proceeds of life

insurance policies paid to t(e (eirs or$eneciaries upon t(e deat( of t(einsured5 #(et(er in a single sum orot(er#ise5 $ut if suc( amounts are (eld $yt(e insurer under an agreement to payinterest t(ereon5 t(e interest paymentss(all $e included in gross income.

*2 mount Recei)ed $y 6nsured as Return of Premium. - (e amount recei)ed $y t(einsured5 as a return of premiums paid $y(im under life insurance5 endo#ment5 orannuity contracts5 eit(er during t(e termor at t(e maturity of t(e term mentionedin t(e contract or upon surrender of t(econtract.

*/ Gifts5 Be?uests5 and Ce)ises. - (e )alueof property ac?uired $y gift5 $e?uest5de)ise5 or descent: Pro)ided5 (o#e)er5 (at income from suc( property5 as #ellas gift5 $e?uest5 de)ise or descent of income from any property5 in cases of transfers of di)ided interest5 s(all $eincluded in gross income.

*' +ompensation for 6nuries or <ic3ness. -amounts recei)ed5 t(roug( ccident or9ealt( 6nsurance or under Wor3menZs+ompensation cts5 as compensation forpersonal inuries or sic3ness5 plus t(eamounts of any damages recei)ed5#(et(er $y suit or agreement5 on accountof suc( inuries or sic3ness.

"!

Business Law Practice Noel | Pangcog




*; 6ncome >xempt under reaty. - 6ncome of any 3ind5 to t(e extent re?uired $y anytreaty o$ligation $inding upon t(eGo)ernment of t(e P(ilippines.

*" Retirement Benets5 Pensions5 Gratuities5etc.-*a Retirement $enets recei)ed under

Repu$lic ct No. A"'1 and t(oserecei)ed $y oLcials and employees of pri)ate rms5 #(et(er indi)idual orcorporate5 in accordance #it( areasona$le pri)ate $enet planmaintained $y t(e employer: Pro)ided5 (at t(e retiring oLcial or employee(as $een in t(e ser)ice of t(e sameemployer for at least ten *10 yearsand is not less t(an fty *;0 years of age at t(e time of (is retirement:Pro)ided5 furt(er5 (at t(e $enetsgranted under t(is su$paragrap( s(all$e a)ailed of $y an oLcial or employeeonly once. For purposes of t(is<u$section5 t(e term Zreasona$lepri)ate $enet planZ means a pension5gratuity5 stoc3 $onus or prot-s(aringplan maintained $y an employer fort(e $enet of some or all of (is oLcialsor employees5 #(erein contri$utionsare made $y suc( employer for t(eoLcials or employees5 or $ot(5 for t(epurpose of distri$uting to suc( oLcialsand employees t(e earnings andprincipal of t(e fund t(us accumulated5and #(erein its is pro)ided in said plant(at at no time s(all any part of t(ecorpus or income of t(e fund $e usedfor5 or $e di)erted to5 any purposeot(er t(an for t(e exclusi)e $enet of t(e said oLcials and employees.

*$ ny amount recei)ed $y an oLcial oremployee or $y (is (eirs from t(e

employer as a conse?uence of separation of suc( oLcial or employeefrom t(e ser)ice of t(e employer$ecause of deat( sic3ness or ot(erp(ysical disa$ility or for any cause$eyond t(e control of t(e said oLcialor employee.

*c (e pro)isions of any existing la# tot(e contrary not#it(standing5 socialsecurity $enets5 retirement gratuities5pensions and ot(er similar $enetsrecei)ed $y resident or nonresidentcitiHens of t(e P(ilippines or aliens #(ocome to reside permanently in t(eP(ilippines from foreign go)ernmentagencies and ot(er institutions5 pri)ateor pu$lic.

*d Payments of $enets due or to $ecomedue to any person residing in t(eP(ilippines under t(e la#s of t(enited <tates administered $y t(enited <tates eterans dministration.

*e Benets recei)ed from or enoyedunder t(e <ocial <ecurity <ystem inaccordance #it( t(e pro)isions of Repu$lic ct No. &2&2.

*f Benets recei)ed from t(e G<6< underRepu$lic ct No. &2%15 includingretirement gratuity recei)ed $ygo)ernment oLcials and employees.

*A =iscellaneous 6tems. -*a 6ncome Ceri)ed $y Foreign

Go)ernment. - 6ncome deri)ed fromin)estments in t(e P(ilippines in loans5stoc3s5 $onds or ot(er domesticsecurities5 or from interest on depositsin $an3s in t(e P(ilippines $y *iforeign go)ernments5 *ii nancinginstitutions o#ned5 controlled5 orenoying renancing from foreigngo)ernments5 and *iii international or

""





regional nancial institutionsesta$lis(ed $y foreign go)ernments.

*$ 6ncome Ceri)ed $y t(e Go)ernment orits Political <u$di)isions. - 6ncomederi)ed from any pu$lic utility or fromt(e exercise of any essentialgo)ernmental function accruing to t(eGo)ernment of t(e P(ilippines or toany political su$di)ision t(ereof.

*c PriHes and #ards. - PriHes and a#ardsmade primarily in recognition of religious5 c(arita$le5 scientic5educational5 artistic5 literary5 or ci)icac(ie)ement $ut only if:*i (e recipient #as selected #it(out

any action on (is part to enter t(econtest or proceeding4 and

*ii (e recipient is not re?uired torender su$stantial future ser)icesas a condition to recei)ing t(e priHeor a#ard.

*d PriHes and #ards in <ports+ompetition. - ll priHes and a#ardsgranted to at(letes in local andinternational sports competitions andtournaments #(et(er (eld in t(eP(ilippines or a$road and sanctioned$y t(eir national sports associations.

*e 1/t( =ont( Pay and t(er Benets. -Gross $enets recei)ed $y oLcials andemployees of pu$lic and pri)ateentities: Pro)ided5 (o#e)er5 (at t(etotal exclusion under t(issu$paragrap( s(all not exceed (irtyt(ousand pesos *P/05000 #(ic( s(allco)er:*i Benets recei)ed $y oLcials and

employees of t(e national and localgo)ernment pursuant to Repu$licct No. ""&"4

*ii Benets recei)ed $y employeespursuant to Presidential Cecree No.&;15 as amended $y =emorandumrder No. 2&5 dated ugust 1/51%&"4

*iii Benets recei)ed $y oLcialsand employees not co)ered $yPresidential decree No. &;15 asamended $y =emorandum rderNo. 2&5 dated ugust 1/5 1%&"4 and

*i)t(er $enets suc( as producti)ityincenti)es and +(ristmas $onus:Pro)ided5 furt(er5 (at t(e ceilingof (irty t(ousand pesos *P/05000may $e increased t(roug( rulesand regulations issued $y t(e<ecretary of Finance5 uponrecommendation of t(e+ommissioner5 after consideringamong ot(ers5 t(e eKect on t(esame of t(e in[ation rate at t(eend of t(e taxa$le year.

*f G<6<5 <<<5 =edicare and t(er+ontri$utions. - G<6<5 <<<5 =edicareand Pag-i$ig contri$utions5 and uniondues of indi)iduals.

*g Gains from t(e <ale of Bonds5Ce$entures or ot(er +erticate of 6nde$tedness. - Gains realiHed from t(esame or exc(ange or retirement of $onds5 de$entures or ot(er certicateof inde$tedness #it( a maturity of more t(an )e *; years.

*( Gains from Redemption of <(ares in=utual Fund. - Gains realiHed $y t(ein)estor upon redemption of s(ares of stoc3 in a mutual fund company asdened in <ection 22 *BB of t(is +ode.

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"#





7. +RINGE BENE+IT TAES/.1 N6R+

National /nternal Re&enue Code ;amended by RA @0D<

SEC. 77. S"ecal T!ea%)e$% o, +!$*e

Be$e% 3* 6mposition of ax.- nal tax of t(irty-four

percent */'Q eKecti)e Danuary 15 1%%&4t(irty-t(ree percent *//Q eKecti)e Danuary 15 1%%%4 and t(irty-t#o percent*/2Q eKecti)e Danuary 15 2000 andt(ereafter5 is (ere$y imposed on t(egrossed-up monetary )alue of fringe$enet furnis(ed or granted to t(eemployee *except ran3 and le employeesas dened (erein $y t(e employer5#(et(er an indi)idual or a corporation*unless t(e fringe $enet is re?uired $yt(e nature of5 or necessary to t(e trade5$usiness or profession of t(e employer5 or#(en t(e fringe $enet is for t(econ)enience or ad)antage of t(eemployer. (e tax (erein imposed ispaya$le $y t(e employer #(ic( tax s(all$e paid in t(e same manner as pro)idedfor under <ection ;A * of t(is +ode. (egrossed-up monetary )alue of t(e fringe$enet s(all $e determined $y di)idingt(e actual monetary )alue of t(e fringe$enet $y sixty-six percent *""QeKecti)e Danuary 15 1%%&4 sixty-se)enpercent *"AQ eKecti)e Danuary 15 1%%%4and sixty-eig(t percent *"&Q eKecti)e Danuary 15 2000 and t(ereafter: Pro)ided5(o#e)er5 (at fringe $enet furnis(ed toemployees and taxa$le under <u$sections*B5 *+5 *C and *> of <ection 2; s(all $etaxed at t(e applica$le rates imposedt(ereat: Pro)ided5 furt(er5 (at t(egrossed -p )alue of t(e fringe $enet

s(all $e determined $y di)iding t(e actualmonetary )alue of t(e fringe $enet $yt(e diKerence $et#een one (undredpercent *100Q and t(e applica$le rates of income tax under <u$sections *B5 *+5 *C5and *> of <ection 2;.

*B Fringe Benet dened.- For purposes of t(is <ection5 t(e term \fringe $enet\means any good5 ser)ice or ot(er $enetfurnis(ed or granted in cas( or in 3ind $yan employer to an indi)idual employee*except ran3 and le employees asdened (erein suc( as5 $ut not limited to5t(e follo#ing:

*1 9ousing4*2 >xpense account4*/ e(icle of any 3ind4*' 9ouse(old personnel5 suc( as maid5

dri)er and ot(ers4*; 6nterest on loan at less t(an mar3et

rate to t(e extent of t(e diKerence$et#een t(e mar3et rate and actualrate granted4

*" =em$ers(ip fees5 dues and ot(erexpenses $orne $y t(e employer fort(e employee in social and at(leticclu$s or ot(er similar organiHations4

*A >xpenses for foreign tra)el4*& 9oliday and )acation expenses4*% >ducational assistance to t(e

employee or (is dependents4 and*10 ,ife or (ealt( insurance and ot(er

non-life insurance premiums or similaramounts in excess of #(at t(e la#allo#s.

*+ Fringe Benets Not axa$le. - (efollo#ing fringe $enets are not taxa$leunder t(is <ection:

"$





*1 Fringe $enets #(ic( are aut(oriHedand exempted from tax under specialla#s4

*2 +ontri$utions of t(e employer for t(e$enet of t(e employee to retirement5

insurance and (ospitaliHation $enetplans4

*/ Benets gi)en to t(e ran3 and leemployees5 #(et(er granted under acollecti)e $argaining agreement ornot4 and

*' Ce minimis $enets as dened in t(erules and regulations to $epromulgated $y t(e <ecretary of Finance5 upon recommendation of t(e+ommissioner.

(e <ecretary of Finance is (ere$y aut(oriHedto promulgate5 upon recommendation of t(e+ommissioner5 suc( rules and regulations asare necessary to carry out eLciently andfairly t(e pro)isions of t(is <ection5 ta3ing intoaccount t(e peculiar nature and special needof t(e trade5 $usiness or profession of t(eemployer.

SEC. 66. De$%o$( 3* (e term \ran3 and le employees\ s(all

mean all employees #(o are (oldingneit(er managerial nor super)isoryposition as dened under existingpro)isions of t(e ,a$or +ode of t(eP(ilippines5 as amended.

*++ (e term \trade5 $usiness or profession\s(all not include performance of ser)ices$y t(e taxpayer as an employee.

Re&enue Regulation 0O

SEC. 6.77. SPECIAL TREATMENT O++RINGE BENE+ITS* 6mposition of Fringe Benets ax ] nal

#it((olding tax is (ere$y imposed on t(egrossed-up monetary )alue of fringe$enet furnis(ed5 granted or paid $y t(e

employer to t(e employee5 except ran3and le employees as dened in t(eseRegulations5 #(et(er suc( employer is anindi)idual5 professional partners(ip or acorporation5 regardless of #(et(er t(ecorporation is taxa$le or not5 or t(ego)ernment and its instrumentalitiesexcept #(en: *1 t(e fringe $enet isre?uired $y t(e nature of or necessary tot(e trade5 $usiness or profession of t(eemployer4 or *2 #(en t(e fringe $enet isfor t(e con)enience or ad)antage of t(eemployer. (e fringe $enet tax s(all $eimposed at t(e follo#ing rates:

>Kecti)e Danuary 15 1%%& - /'Q>Kecti)e Danuary 15 1%%% - //Q>Kecti)e Danuary 15 2000 - /2Q

(e tax imposed under <ec. // of t(e+ode s(all $e treated as a nal income taxon t(e employee #(ic( s(all $e #it((eldand paid $y t(e employer on a calendar?uarterly $asis as pro)ided under <ec. ;A* *Wit((olding of Final ax on certain6ncomes and <ec. ;& *Ouarterly Returnsand Payments of axes Wit((eld of t(e+ode.

(e grossed-up monetary )alue of t(efringe $enet s(all $e determined $ydi)iding t(e monetary )alue of t(e fringe$enet $y t(e follo#ing percentages andin accordance #it( t(e follo#ing sc(edule:

"%







employer5 t(en t(e )alue is t(eamount granted or paid for.

*2 6f t(e fringe $enet is granted orfurnis(ed $y t(e employer in propertyot(er t(an money and o#ners(ip istransferred to t(e employee5 t(en t(e

)alue of t(e fringe $enet s(all $ee?ual to t(e fair mar3et )alue of t(eproperty as determined in accordance#it( <ec. " *> of t(e +ode *ut(orityof t(e +ommissioner to Prescri$e RealProperty alues.

*/ 6f t(e fringe $enet is granted orfurnis(ed $y t(e employer in propertyot(er t(an money $ut o#ners(ip is nottransferred to t(e employee5 t(e )alueof t(e fringe $enet is e?ual to t(edepreciation )alue of t(e property.

axation of fringe $enet recei)ed $y anon-resident alien indi)idual #(o is notengaged in trade or $usiness in t(eP(ilippines ] fringe $enet tax of t#enty-)e percent *2;Q s(all $eimposed on t(e grossed-up monetary)alue of t(e fringe $enet. (e said tax$ase s(all $e computed $y di)iding t(emonetary )alue of t(e fringe $enet $yse)enty-)e per cent *A;Q.

axation of fringe $enet recei)ed $y *1an alien indi)idual employed $y regionalor area (ead?uarters of a multinationalcompany or $y regional operating(ead?uarters of a multinational company4*2 an alien indi)idual employed $y anoKs(ore $an3ing unit of a foreign $an3esta$lis(ed in t(e P(ilippines4 */ an alienindi)idual employed $y a foreign ser)icecontractor or $y a foreign ser)icesu$contractor engaged in petroleum

operations in t(e P(ilippines4 and *' anyof t(eir Filipino indi)idual employees #(oare employed and occupying t(e sameposition as t(ose occupied or (eld $y t(ealien employees. ] fringe $enet tax of fteen per cent *1;Q s(all $e imposed on

t(e grossed-up monetary )alue of t(efringe $enet. (e said tax $ase s(all $ecomputed $y di)iding t(e monetary )alueof t(e fringe $enet $y eig(ty-)e percent *&;Q. cdrep

axation of fringe $enet recei)ed $yemployees in special economic Hones ]Fringe $enets recei)ed $y employees inspecial economic Hones5 including +lar3<pecial >conomic _one and <u$ic <pecial>conomic and Free rade _one5 are alsoco)ered $y t(ese regulations and su$ectto t(e normal rate of fringe $enet tax ort(e special rates of 2;Q or 1;Q aspro)ided a$o)e.

*B Cenition of Fringe Benet ] 6n general5except as ot(er#ise pro)ided under t(eseregulations5 for purposes of t(is <ection5t(e term \FR6NG> B>N>F6\ means anygood5 ser)ice5 or ot(er $enet furnis(ed orgranted $y an employer in cas( or in 3ind5in addition to $asic salaries5 to anindi)idual employee *except ran3 and leemployee as dened in t(ese regulationssuc( as5 $ut not limited to t(e follo#ing:*1 9ousing4*2 >xpense account4*/ e(icle of any 3ind4*' 9ouse(old personnel5 suc( as maid5

dri)er and ot(ers4*; 6nterest on loan at less t(an mar3et

rate to t(e extent of t(e diKerence

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$et#een t(e mar3et rate and actualrate granted4

*" =em$ers(ip fees5 dues and ot(erexpenses $orne $y t(e employer fort(e employee in social and at(leticclu$s or ot(er similar organiHations4

*A >xpenses for foreign tra)el4*& 9oliday and )acation expenses4*% >ducational assistance to t(e

employee or (is dependents4 and*10 ,ife or (ealt( insurance and ot(er

non-life insurance premiums or similaramounts in excess of #(at t(e la#allo#s.

For t(is purpose5 t(e guidelines for)aluation of specic types of fringe$enets and t(e determination of t(emonetary )alue of t(e fringe $enets aregi)e $elo#. (e taxa$le )alue s(all $e t(egrossed-up monetary )alue of t(e fringe$enet.

*1 9ousing pri)ilege ]*a 6f t(e employer leases a residential

property for t(e use of (isemployee and t(e said property ist(e usual place of residence of t(eemployee5 t(e )alue of t(e $enets(all $e t(e amount of rental paidt(ereon $y t(e employer5 ase)idenced $y t(e lease contract. (e monetary )alue of t(e fringe$enet s(all $e fty per cent *;0Qof t(e )alue of t(e $enet.

*$ 6f t(e employer o#ns a residentialproperty and t(e same is assignedfor t(e use of (is employee as (isusual place of residence5 t(eannual )alue of t(e $enet s(all $e)e per cent *;Q of t(e mar3et

)alue of t(e land and impro)ement5as declared in t(e Real Property axCeclaration Form5 or Honal )alue asdetermined $y t(e +ommissionerpursuant to <ection "*> of t(e+ode *ut(ority of t(e

+ommissioner to Prescri$e RealProperty alues5 #(ic(e)er is(ig(er. (e monetary )alue of t(efringe $enet s(all $e fty per cent*;0Q of t(e )alue of t(e $enet.

(e monetary )alue of t(e (ousingfringe $enet is e?ui)alent to t(efollo#ing:

= V ;Q*F= or _N, ,>S ;0Q

W9>R>:= V =N>RE ,>F= V F6R =RX> ,>

*c 6f t(e employer purc(ases aresidential property on installment$asis and allo#s (is employee touse t(e same as (is usual place of residence5 t(e annual )alue of t(e$enet s(all $e )e per cent *;Qof t(e ac?uisition cost5 exclusi)e of interest. (e monetary )alue of fringe $enet s(all $e fty per cent*;0Q of t(e )alue of t(e $enet.

*d 6f t(e employer purc(ases aresidential property and transferso#ners(ip t(ereof in t(e name of t(e employee5 t(e )alue of t(e$enet s(all $e t(e employerZsac?uisition cost or Honal )alue asdetermined $y t(e +ommissionerpursuant to <ection "*> of t(e

#1





+ode *ut(ority of t(e+ommissioner to Prescri$e RealProperty alues5 #(ic(e)er is(ig(er. (e monetary )alue of t(efringe $enet s(all $e t(e entire)alue of t(e $enet.

*e 6f t(e employer purc(ases aresidential property and transferso#ners(ip t(ereof to (is employeefor t(e latterZs residential use5 at aprice less t(an t(e employerZsac?uisition cost5 t(e )alue of t(e$enet s(all $e t(e diKerence$et#een t(e fair mar3et )alue5 asdeclared in t(e Real Property axCeclaration Form5 or Honal )alue asdetermined $y t(e +ommissionerpursuant to <ec. "*> of t(e +ode

*ut(ority of t(e +ommissioner toPrescri$e Real Property alues5#(ic(e)er is (ig(er5 and t(e cost tot(e employee. (e monetary )alueof t(e fringe $enet s(all $e t(eentire )alue of t(e $enet.

*f 9ousing pri)ilege of militaryoLcials of t(e rmed Forces of t(eP(ilippines *FP consisting of oLcials of t(e P(ilippine rmy5P(ilippine Na)y and P(ilippine irForce s(all not $e treated astaxa$le fringe $enet inaccordance #it( t(e existingdoctrine t(at t(e <tate s(allpro)ide its soldiers #it( necessary?uarters #(ic( are #it(in oraccessi$le from t(e military campso t(at t(ey can $e readily on callto meet t(e exigencies of t(eirmilitary ser)ice.

*g (ousing unit #(ic( is situatedinside or adacent to t(e premises

of a $usiness or factory s(all not $econsidered as a taxa$le fringe$enet. (ousing unit isconsidered adacent to t(epremises of t(e $usiness if it islocated #it(in t(e maximum of fty

*;0 meters from t(e perimeter of t(e $usiness premises.

*( emporary (ousing for anemployee #(o stays in a (ousingunit for t(ree */ mont(s or lesss(all not $e considered a taxa$lefringe $enet.

*2 >xpense account ]*a 6n general5 expenses incurred $y

t(e employee $ut #(ic( are paid$y (is employer s(all $e treated as

taxa$le fringe $enets5 except#(en t(e expenditures are dulyreceipted for and in t(e name of t(e employer and t(e expendituresdo not parta3e t(e nature of apersonal expense attri$uta$le tot(e employee.

*$ >xpenses paid for $y t(e employee$ut reim$ursed $y (is employers(all $e treated as taxa$le $enetsexcept only #(en t(e expendituresare duly receipted for and in t(ename of t(e employer and t(eexpenditures do not parta3e t(enature of a personal expenseattri$uta$le to t(e said employee.

*c Personal expenses of t(e employee*li3e purc(ases of groceries for t(epersonal consumption of t(eemployee and (is family mem$erspaid for or reim$ursed $y t(eemployer to t(e employee s(all $etreated as taxa$le fringe $enets

#2




| g gAtty. Jose Cochingyan III AY 2011-2012

of t(e employee #(et(er or not t(esame are duly receipted for in t(ename of t(e employer.

*d Representation and transportationallo#ances #(ic( are xed inamounts and are regular recei)ed

$y t(e employees as part of t(eirmont(ly compensation incomes(all not $e treated as taxa$lefringe $enets $ut t(e same s(all$e considered as taxa$lecompensation income su$ect tot(e tax imposed under <ec. 2' of t(e +ode.

*/ =otor )e(icle of any 3ind ]*a 6f t(e employer purc(ases t(e

motor )e(icle in t(e name of t(eemployee5 t(e )alue of t(e $enet

is t(e ac?uisition cost t(ereof. (emonetary )alue of t(e fringe$enet s(all $e t(e entire )alue of t(e $enet5 regardless of #(et(ert(e motor )e(icle is used $y t(eemployee partly for (is personalpurpose and partly for t(e $enetof (is employer.

*$ 6f t(e employer pro)ides t(eemployee #it( cas( for t(epurc(ase of a motor )e(icle5 t(eo#ners(ip of #(ic( is placed in t(ename of t(e employee5 t(e )alue of t(e $enets s(all $e t(e amount of cas( recei)ed $y t(e employee. (e monetary )alue of t(e fringe$enet s(all $e t(e entire )alue of t(e $enet regardless of #(et(ert(e motor )e(icle is used $y t(eemployee partly for (is personalpurpose and partly for t(e $enetof (is employer5 unless t(e same#as su$ected to a #it((olding tax

as compensation income underRe)enue Regulations No. 2-%&.

*c 6f t(e employer purc(ases t(e caron installment $asis5 t(e o#ners(ipof #(ic( is placed in t(e name of t(e employee5 t(e )alue of t(e

$enet s(all $e t(e ac?uisition costexclusi)e of interest5 di)ided $y)e *; years. (e monetary )alueof t(e fringe $enet s(all $e t(eentire )alue of t(e $enetregardless of #(et(er t(e motor)e(icle is used $y t(e employeepartly for (is personal purpose andpartly for t(e $enet of (isemployer.

*d 6f t(e employer s(oulders a portionof t(e amount of t(e purc(ase

price of a motor )e(icle t(eo#ners(ip of #(ic( is placed in t(ename of t(e employee5 t(e )alue of t(e $enet s(all $e t(e amounts(ouldered $y t(e employer. (emonetary )alue of t(e fringe$enet s(all $e t(e entire )alue of t(e $enet regardless of #(et(ert(e motor )e(icle is used $y t(eemployee partly for (is personalpurpose and partly for t(e $enetof (is employer. +dpr

*e 6f t(e employer o#ns andmaintains a [eet of motor )e(iclesfor t(e use of t(e $usiness and t(eemployees5 t(e )alue of t(e $enets(all $e t(e ac?uisition cost of allt(e motor )e(icles not normallyused for sales5 freig(t5 deli)eryser)ice and ot(er non-personalused di)ided $y )e *; years. (emonetary )alue of t(e fringe

#




| g gAtty. Jose Cochingyan III AY 2011-2012

$enet s(all $e fty per cent *;0Qof t(e )alue of t(e $enet.

(e monetary )alue of t(e motor)e(icle fringe $enet is e?ui)alentto t(e follo#ing:

= V *;S ;0Q

#(ere:= V =onetary )alue V ac?uisition cost

*f 6f t(e employer leases andmaintains a [eet of motor )e(iclesfor t(e use of t(e $usiness and t(eemployees5 t(e )alue of t(e $enets(all $e t(e amount of rental

payments for motor )e(icles notnormally used for sales5 freig(t5deli)ery5 ser)ice and ot(er non-personal use. (e monetary )alueof t(e fringe $enet s(all $e ftyper cent *;0Q of t(e )alue of t(e$enet.

*g (e use of aircraft *including(elicopters o#ned and maintained$y t(e employer s(all $e treated as$usiness use and not $e su$ect tot(e fringe $enets tax.

*( (e use of yac(t #(et(er o#nedand maintained or leased $y t(eemployer s(all $e treated astaxa$le fringe $enet. (e )alue of t(e $enet s(all $e measured$ased on t(e depreciation of ayac(t at an estimated useful life of 20 years.

*' 9ouse(old expenses ] >xpenses of t(e employee #(ic( are $orne $y t(eemployer for (ouse(old personnel5

suc( as salaries of (ouse(old (elp5personal dri)er of t(e employee5 orot(er similar personal expenses *li3epayment for (omeo#ners associationdues5 gar$age dues5 etc. s(all $etreated as taxa$le fringe $enets.

*; 6nterest on loan at less t(an mar3etrate*a 6f t(e employer lends money to (is

employee free of interest or at arate lo#er t(an t#el)e per cent*12Q5 suc( interest foregone $yt(e employer or t(e diKerence of t(e interest assumed $y t(eemployee and t(e rate of t#el)eper cent *12Q s(all $e treated asa taxa$le fringe $enet.

*$ (e $enc(mar3 interest rate of t#el)e per cent *12Q s(all remainin eKect until re)ised $y asu$se?uent regulation.

*c (is regulation s(all apply toinstallment payments or loans #it(interest rate lo#er t(an t#el)e percent *12Q starting Danuary 151%%&.

*" =em$ers(ip fees5 dues5 and ot(erexpenses $orne $y t(e employer for(is employee5 in social and at(leticclu$s or ot(er similar organiHations. ] (ese expenditures s(all $e treated astaxa$le fringe $enets of t(eemployee in full.

*A >xpenses for foreign tra)el ]

*a Reasona$le $usiness expenses#(ic( are paid for $y t(e employerfor t(e foreign tra)el of (isemployee for t(e purpose of

#!




g gAtty. Jose Cochingyan III AY 2011-2012

attending $usiness meetings orcon)entions s(all not $e treated astaxa$le fringe $enets. 6n t(isinstance5 inland tra)el expenses*suc( as expenses for food5$e)erages and local transportation

except lodging cost in a (otel *orsimilar esta$lis(ments amountingto an a)erage of <b/00.00 or lessper day5 s(all not $e su$ect to afringe $enet tax. (e expensess(ould $e supported $y documentspro)ing t(e actual occurrences of t(e meetings or con)entions. (e cost of economy and $usinessclass airplane tic3et s(all not $esu$ect to a fringe $enet tax.9o#e)er5 /0 percent of t(e cost of

rst class airplane tic3et s(all $esu$ect to a fringe $enet tax.

*$ 6n t(e a$sence of documentarye)idence s(o#ing t(at t(eemployeeZs tra)el a$road #as inconnection #it( $usiness meetingsor con)entions5 t(e entire cost of t(e tic3et5 including cost of (otelaccommodations and ot(erexpenses incident t(eretos(ouldered $y t(e employer5 s(all$e treated as taxa$le fringe$enets. (e $usiness meetingss(all $e e)idenced $y oLcialcommunications from $usinessassociates a$road indicating t(epurpose of t(e meetings. Businesscon)entions s(all $e e)idenced $yoLcial in)itationscommunicationsfrom t(e (ost organiHation or entitya$road. t(er#ise5 t(e entire costt(ereof s(ouldered $y t(eemployer s(all $e treated as

taxa$le fringe $enets of t(eemployee.

*c ra)elling expenses #(ic( are paid$y t(e employer for t(e tra)el of t(e family mem$ers of t(eemployee s(all $e treated as

taxa$le fringe $enets of t(eemployee.

*& 9oliday and )acation expenses ]9oliday and )acation expenses of t(eemployee $orne $y (is employer s(all$e treated as taxa$le fringe $enets.

*% >ducational assistance to t(eemployee or (is dependents ]*a (e cost of t(e educational

assistance to t(e employee #(ic(

are $orne $y t(e employer s(all5 ingeneral5 $e treated as taxa$lefringe $enet. 9o#e)er5 asc(olars(ip grant to t(e employee$y t(e employer s(all not $etreated as taxa$le fringe $enet if t(e education or study in)ol)ed isdirectly connected #it( t(eemployerZs trade5 $usiness orprofession5 and t(ere is a #rittencontract $et#een t(em t(at t(eemployee is under o$ligation toremain in t(e employ of t(eemployer for period of time t(att(ey (a)e mutually agreed upon. 6nt(is case5 t(e expenditure s(all $etreated as incurred for t(econ)enience and furt(erance of t(eemployerZs trade or $usiness.

*$ (e cost of educational assistanceextended $y an employer to t(edependents of an employee s(all$e treated as taxa$le fringe

#"




Atty. Jose Cochingyan III AY 2011-2012

$enets of t(e employee unlesst(e assistance #as pro)idedt(roug( a competiti)e sc(emeunder t(e sc(olars(ip program of t(e company.

*10 ,ife or (ealt( insurance and ot(ernon-life insurance premiums or similaramounts in excess of #(at t(e la#allo#s ] (e cost of life or (ealt(insurance and ot(er non-life insurancepremiums $orne $y t(e employer for(is employee s(all $e treated astaxa$le fringe $enet5 except t(efollo#ing: *a contri$utions of t(eemployer for t(e $enet of t(eemployee5 pursuant to t(e pro)isionsof existing la#5 suc( as under t(e

<ocial <ecurity <ystem *<<<5 *R.. No.&2&25 as amended or under t(eGo)ernment <er)ice 6nsurance <ystem*G<6< *R.. No. &2%1 5 or similarcontri$utions arising from t(epro)isions of any ot(er existing la#4and *$ t(e cost of premiums $orne $yt(e employer for t(e group insuranceof (is employees.

*+ Fringe Benets Not <u$ect to FringeBenets ax ] 6n general5 t(e fringe

$enets tax s(all not $e imposed on t(efollo#ing fringe $enets:*1 Fringe $enets #(ic( are aut(oriHed

and exempted from income tax undert(e +ode or under any special la#4

*2 +ontri$utions of t(e employer for t(e$enet of t(e employee to retirement5insurance and (ospitaliHation $enetplans4

*/ Benets gi)en to t(e ran3 and le5#(et(er granted under a collecti)e$argaining agreement or not4

*' Ce minimis $enets as dened int(ese Regulations4

*; 6f t(e grant of fringe $enets to t(e

employee is re?uired $y t(e nature of5or necessary to t(e trade5 $usiness orprofession of t(e employer4 or

*" 6f t(e grant of t(e fringe $enet is fort(e con)enience of t(e employer.

(e exemption of any fringe $enet fromt(e fringe $enet tax imposed under t(is<ection s(all not $e interpreted to meanexemption from any ot(er income taximposed under t(e +ode except if t(esame is li3e#ise expressly exempt from

any ot(er income tax imposed under t(e+ode or under any ot(er existing la#. (us5 if t(e fringe $enet is exemptedfrom t(e fringe $enets tax5 t(e samemay5 (o#e)er5 still form part of t(eemployeeZs gross compensation income#(ic( is su$ect to income tax5 (ence5li3e#ise su$ect to a #it((olding tax oncompensation income payment.

(e term \C> =6N6=6<\ $enets #(ic( areexempt from t(e fringe $enet tax s(all5 in

general5 $e limited to facilities orpri)ileges furnis(ed or oKered $y anemployer to (is employees t(at are of relati)ely small )alue and are oKered orfurnis(ed $y t(e employer merely as ameans of promoting t(e (ealt(5 good#ill5contentment5 or eLciency of (isemployees suc( as t(e follo#ing:

##





*1 =onetiHed unused )acation lea)ecredits of employees not exceeding ten*10 days during t(e year 4

*2 =edical cas( allo#ance to dependentsof employees not exceeding PA;0 persemester or P12; per mont( 4

*/ Rice su$sidy of P/;0 per mont(granted $y an employer to (isemployees 4

*' niforms gi)en to employees $y t(eemployer 4

*; =edical $enets gi)en to t(eemployees $y t(e employer 4

*" ,aundry allo#ance of P1;0 per mont( 4*A >mployee ac(ie)ement a#ards5 e.g.

for lengt( of ser)ice or safetyac(ie)ement5 #(ic( must $e in t(eform of a tangi$le personal property

ot(er t(an cas( or gift certicate5 #it(an annual monetary )alue notexceeding one-(alf *12 mont( of t(e$asic salary of t(e employee recei)ingt(e a#ard under an esta$lis(ed #rittenplan #(ic( does not discriminate infa)or of (ig(ly paid employees 4 dctai

*& +(ristmas and maor anni)ersarycele$rations for employees and t(eirguests 4

*% +ompany picnics and sportstournaments in t(e P(ilippines and are

participated exclusi)ely $yemployees 4 and

*10 Flo#ers5 fruits5 $oo3s or similaritems gi)en to employees underspecial circumstances5 e.g. on accountof illness5 marriage5 $irt( of a $a$y5etc.

*C ax ccounting for t(e Fringe BenetFurnis(ed to t(e >mployee and t(e FringeBenet ax Cue (ereon. ] s a general

rule5 t(e amount of taxa$le fringe $enetand t(e fringe $enets tax s(all constituteallo#a$le deductions from gross income of t(e employer. 9o#e)er5 if t(e $asis forcomputation of t(e fringe $enets tax ist(e depreciation )alue5 t(e Honal )alue as

determined $y t(e +ommissioner pursuantto <ection "*> of t(e +ode or t(e fairmar3et )alue as determined in t(e currentreal property tax declaration of a certainproperty5 only t(e actual fringe $enetstax paid s(all constitute a deducti$leexpense for t(e employer. (e )alue of t(efringe $enet s(all not $e deducti$le ands(all $e presumed to (a)e $een tac3ed onor actually claimed as depreciationexpense $y t(e employer.

Pro)ided5 (o#e)er5 t(at if t(e aforesaidHonal )alue or fair mar3et )alue of t(e saidproperty is greater t(an its cost su$ect todepreciation5 t(e excess amount s(all $eallo#ed as a deduction from t(eemployerZs gross income as fringe $enetexpense.

6llustrations on fringe $enet furnis(ed orgranted $y t(e employer to an employee*ot(er t(an a ran3-and-le employee*1 Curing t(e year 1%%&5 B+ +orporation

paid for t(e mont(ly rental of aresidential (ouse of its $ranc(manager *=r. Cela +ruH amounting toP""5000.00.

6n t(is case5 t(e mont(ly taxa$legrossed-up monetary )alue of t(e saidfringe $enet furnis(ed or granted toits $ranc( manager *=r. Cela +ruHs(all $e P;05000.005 computed asfollo#s:

#$



Business Law Practice Noel | PangcogAtt J C hi III AY 2011 2012




6n general5 under t(is illustration5 t(eE_ +orporation s(all not furt(er claimdeduction for allo#ing its ssistantice-President t(e use of its residentialproperty since t(e cost for t(e uset(ereof (as already $een reco)ered as

deduction from its gross income under\Cepreciation >xpense\. 9o#e)er5since t(e fringe $enet tax in t(eamount of P105A/2./25 assumed andpaid $y E_ corporation (as not as yet$een reco)ered $y #ay of deductionfrom gross income5 t(e same s(all $eallo#ed as a deduction from its grossincome. E_ +orporation s(all ta3e upt(e foregoing in its $oo3s of accounts5as follo#s:

Ce$it: Fringe Benet ax >xpenseP105A/2./2

+redit: +as(Fringe Benet ax Paya$leP105A/2./2

o record fringe $enet tax expense fort(eresidential property furnis(ed toemployees.

9o#e)er5 if t(e cost of t(e aforesaidcondominium unit su$ect to

depreciation allo#ance *example: itsac?uisition cost is only PA50005000.00is lesser t(an its fair mar3et )alue asdetermined $y t(e +ommissioner *i.e.P1050005000.005 t(e excess amount*i.e. P/50005000.00 s(all $e amortiHedt(roug(out t(e remaining estimateduseful life of t(e residential propertyused in computing t(e said employerZsdepreciation expense and allo#ed as adeduction from t(e said employerZs

gross income as fringe $enetexpense. (us5 if t(e remainingestimated useful life t(ereof during t(eyear 1%%& is fteen *1; years5 itsmont(ly amortiHation s(all $ecomputed as follo#s:

=ont(ly amortiHation *P/50005000.00di)ided $y 1; years di)ided $y 12mont(s P1"5"""."A

6n t(is case5 E_ +orporation s(all ta3eup t(e foregoing in its $oo3s of accounts as follo#s:

Ce$it: Fringe $enet expenseP1"5"""."A

Ce$it: Fringe $enet tax P105A/2./2

+redit: 6ncome constructi)ely realiHedP1"5"""."A+redit: +as(Fringe $enet tax paya$leP105A/2./2

o record fringe $enet and fringe$enet tax expenses and incomeconstructi)ely realiHed from t(e use of company-o#ned residential propertyfurnis(ed to employees.

x------------------------------------x

/.2 Nature of Fringe Benet axes

B/R Ruling 00D00 ;5nited Coconut Chemical /nc.<

INCOME TAJ +!$*e be$e%( !ece#ed bye)"loyee( $ S"ecal Eco$o)c o$e( -Fringe $enets recei)ed $y employees5 exceptran3 and le employees5 in special economicHones5 including +lar3 <pecial >conomic _oneand <u$ic <pecial >conomic and Free rade

#&

Business Law Practice Noel | PangcogAtt J C hi III AY 2011 2012




_one5 are su$ect to t(e normal rate of fringe$enet tax5 i.e.5 /'Q eKecti)e Danuary 151%%&5 //Q eKecti)e Danuary 15 1%%% and /2QeKecti)e Danuary 15 2000 or t(e special ratesof 2;Q imposed on t(e fringe $enet recei)ed$y non-resident alien not

engaged in trade or $usiness in t(eP(ilippines or 1;Q imposed on t(e fringe$enet recei)ed $y *1 an alien indi)idualemployed $y regional or area (ead?uarters of a multinational company or $y regionaloperating (ead?uarters of a multinationalcompany4 *2 an alien indi)idual employed $yan oKs(ore $an3ing unit of a foreign $an3esta$lis(ed in t(e P(ilippines4 */ an alienindi)idual employed $y a foreign ser)icecontractor or $y a foreign ser)ice

su$contractor engaged in petroleumoperations in t(e P(ilippines4 and *' any of t(eir Filipino indi)idual employees #(o areemployed and occupying t(e same position ast(ose occupied or (eld $y t(e alienemployees5 pursuant to <ec. 2.// * of Re)enue Regulations No. /-%&.=oreo)er5 t(e grossed-up monetary )alue of fringe $enet on #(ic( t(e nal #it((oldingtax is paid is no# deducti$le on t(e part of t(e employer falling under t(e expensecategory5 pursuant to <ection /'**1*a*65

also of t(e ax +ode of 1%%A. *B6R Ruling No.00'-2000 dated Danuary ;5 2000

B/R Ruling $0O ;Toyota 'arts 'hilippines /nc<

INCOME TAJ +!$*e Be$e%( Ta - (eterm \fringe $enet\ is dened under <ection//*B of t(e ax +ode of 1%%A as any good5ser)ice or ot(er $enet furnis(ed or grantedin cas( or in 3ind $y an employer to anindi)idual employee *except ran3 and le

employees. 6t includes5 among ot(ers5(ousing $enet granted to t(e managerialand super)isory employees of t(e company. (e Cirectors of P #(o are at same timerecei)ing xed salaries as P oLcers5 areconsidered as employees (olding positions

ot(er t(an ran3 and le positions i.e.managerial andor super)isory positions.

ccordingly5 t(e (ousing assistance granted$y P to t(e expatriates #(o are directorsand at t(e same time (olding managerial andsuper)isory positions5 is considered as fringe$enet su$ect to t(e Fringe Benet ax under<ection // *B of t(e ax +ode of 1%%A andimplemented $y Re)enue Regulations No. /-%&. (e source of t(e fringe $enet granted tot(e employees does not aKect t(e taxa$ility

of t(e said fringe $enet. (us5 t(e (ousingallo#ance of t(e directoroLcer of P #(ic(is paid out of its Retained >arnings5 is stillconsidered as a fringe $enet su$ect to t(efringe $enet tax imposed under <ection //of t(e ax +ode of 1%%A as implemented $yRe)enue Regulations No. /-%&.

<ection // of t(e ax +ode of 1%%A on fringe$enet applies to managerial and super)isoryemployees. (us5 #(ere t(e oLcerdirector of P is considered as an employee regardless

of #(et(er a xed mont(ly income is gi)en ort(eir remuneration is determined $y t(eBoard of Cirectors $ased on t(e Retained>arnings of t(e corporation5 t(e (ousingassistance granted to t(e saidoLcersdirectors are still su$ect to t(e FringeBenet ax. n t(e ot(er (and5 #(ere adirector is $eing paid on a retainer $asis5 noemployer-employee relations(ips exist$et#een t(e company and t(e director. (us5t(e (ousing assistance granted to (im s(all

$0





Business Law Practice Noel | PangcogAtty Jose Cochingyan III AY 2011 2012




Cepartment of ,a$or and >mployment*C,>. (e RWPB of eac( region s(alldetermine t(e #age rates in t(e diKerentregions $ased on esta$lis(ed criteria and s(all$e t(e $asis of exemption from income tax fort(is purpose.

9oliday pay5 o)ertime pay5 nig(t s(iftdiKerential pay and (aHard pay earned $y t(eaforementioned =W> s(all li3e#ise $eco)ered $y t(e a$o)e exemption. Pro)ided5(o#e)er5 t(at an employee #(orecei)esearns additional compensation suc(as commissions5 (onoraria5 fringe $enets5$enets in excess of t(e allo#a$le statutoryamount of P/05000.005 taxa$le allo#ancesand ot(er taxa$le income ot(er t(an t(e<=W5 (oliday pay5 o)ertime pay5 (aHard pay

and nig(t s(ift diKerential pay s(all not enoyt(e pri)ilege of $eing a =W> and5 t(erefore5(is(er entire earnings are not exempt fromincome tax and5 conse?uently5 from#it((olding tax.

=W>s recei)ing ot(er income5 suc( as incomefrom t(e conduct of trade5 $usiness5 orpractice of profession5 except income su$ectto nal tax5 in addition to compensationincome are not exempted from income tax ont(eir entire income earned during t(e taxa$le

year. (is rule5 not#it(standing5 t(e <=W59oliday pay5 o)ertime pay5 nig(t s(iftdiKerential pay and (aHard pay s(all still $eexempt from #it((olding tax.

For purposes of t(ese regulations5 (aHard pays(all mean t(e amount paid $y t(e employerto =W>s #(o #ere actually assigned todanger or strife-torn areas5 disease-infestedplaces5 or in distressed or isolated stationsand camps5 #(ic( expose t(em to great

danger of contagion or peril to life. ny(aHard pay paid to =W>s #(ic( does notsatisfy t(e a$o)e criteria is deemed su$ect toincome tax and conse?uently5 to #it((oldingtax.

6n case of (aHardous employment5 t(eemployer s(all attac( to t(e =ont(lyRemittance Return of Wit((olding ax on+ompensation *B6R Form No. 1"01+ forreturn periods =arc(5 Dune5 <eptem$er andCecem$er a copy of t(e list su$mitted to t(enearest C,> RegionalPro)incial Lces Uperations Ci)isionnit s(o#ing t(e namesof =W>s #(o recei)ed t(e (aHard pay5 periodof employment5 amount of (aHard pay permont(4 and ustication for payment of (aHardpay as certied $y said C,>allied agency

t(at t(e (aHard pay is ustia$le.

(e NWP+ s(all oLcially su$mit a =atrix of Wage rder $y region *nnex IJ5 and anyc(anges t(ereto5 #it(in ten *10 days after itseKecti)ity to t(e ssistant +ommissioner5+ollection<er)ice5 for circulariHation in t(eB6R.

ny reduction or diminution of #ages forpurposes of exemption from income tax s(allconstitute misrepresentation and t(erefore5

s(all result to t(e automatic disallo#ance of expense5 i.e. compensation and $enetsaccount5 on t(e part of t(e employer. (eoKenders may $e criminally prosecuted underexisting la#s.

*1' +ompensation income of employees int(e pu$lic sector #it( compensation incomeof not more t(an t(e <=W in t(e non-agricultural sector5 as xed $y RWPBNWP+5

$

Business Law Practice Noel | PangcogAtty Jose Cochingyan III AY 2011-2012




applica$le to t(e place #(ere (es(e isassigned.

(e aforesaid income s(all li3e#ise $eexempted from income tax.

(e $asic salary of =W>s in t(e pu$lic sectors(all $e e?uated to t(e <=W in t(e non-agricultural sector applica$le to t(e place#(ere (es(e is assigned. (e determinationof t(e <=W in t(e pu$lic sector s(all li3e#iseadopt t(e same procedures and considerationas t(ose of t(e pri)ate sector.

9oliday pay5 o)ertime pay5 nig(t s(iftdiKerential pay and (aHard pay earned $y t(eaforementioned =W> in t(e pu$lic sector s(allli3e#ise $e co)ered $y t(e a$o)e exemption.

Pro)ided5 (o#e)er5 t(at a pu$lic sectoremployee #(o recei)es additionalcompensation suc( as commissions5(onoraria5 fringe $enets5 $enets in excessof t(e allo#a$le statutory amount of P/05000.005 taxa$le allo#ances and ot(ertaxa$le income ot(er t(an t(e <=W5 (olidaypay5 o)ertime pay5 nig(t s(ift diKerential payand (aHard pay s(all not enoy t(e pri)ilege of $eing a =W> and5 t(erefore5 (is(er entireearnings are not exempt from income tax and5conse?uently5 from #it((olding tax.

=W>s recei)ing ot(er income5 suc( as incomefrom t(e conduct of trade5 $usiness5 orpractice of profession5 except income su$ectto nal tax5 in addition to compensationincome are not exempted from income tax ont(eir entire income earned during t(e taxa$leyear. (is rule5 not#it(standing5 t(e <=W59oliday pay5 o)ertime pay5 nig(t s(iftdiKerential pay and (aHard pay s(all still $eexempt from #it((olding tax.

For purposes of t(ese regulations5 (aHard pays(all mean t(e amount paid $y t(e employerto =W>s #(o #ere actually assigned todanger or strife-torn areas5 disease-infestedplaces5 or in distressed or isolated stations

and camps5 #(ic( expose t(em to greatdanger of contagion or peril to life. ny(aHard pay paid to =W>s #(ic( does notsatisfy t(e a$o)e criteria is deemed su$ect toincome tax and conse?uently to #it((oldingtax.

6n case of (aHardous employment5 t(eemployer s(all attac( to t(e =ont(lyRemittance Return of Wit((olding ax on+ompensation *B6R Form No. 1"01+ forreturn periods =arc(5 Dune5 <eptem$er and

Cecem$er a copy of Cepartment of Budgetand =anagement *CB= circulars5 ore?ui)alent5 as to #(o are allo#ed to recei)e(aHard pay.

x------------------------------------x

/./.1 Lea&e Credits

B/R Ruling No. 0D@00 ;Ci&il ,er&ice Commission<

INCOME TAJ Mo$e%a%o$ o, lea#e

c!ed%( %o a )a)') o, 7> day( a$de#e$ '" %o 9> day( $o% alloed ,o! %aee)"%o$ "'!"o(e( - (e ten-dayallo#a$le monetiHation of lea)e credits for taxexemption purposes (a)e $een crafted intoRe)enue Regulations No. /-%& in relation topertinent Doint +<+-CB= +irculars go)erningt(e su$ect of lea)e credits5 namely5 Doint+<+-CB= +irculars No. 15 s. 1%%1. (e said+ircular denes monetiHation of lea)e creditsas payment of t(e money )alue of t(e

$!




Atty. Jose Cochingyan III AY 2011 2012

accumulated )acation lea)e credits #it(outactually going on lea)e of a$sence. Rule 6665<ection 1 *aS (us5 oLcers and employees int(e career and non-career ser)ice5 #(et(erpermanent5 pro)isional5 temporary or casual5#(o (a)e accumulated at least fteen *1;

days )acation lea)eser)ice credits s(all $eallo#ed to monetiHe a maximum of ten *10#or3ing days )acation lea)eser)ice credits ayear. (e sc(eme for t(e monetiHation of lea)ecredits is in t(e nature of a facility or pri)ilegeof relati)ely small )alue #(ic( are oKered orfurnis(ed $y t(e employer-merely as a meansof promoting t(e (ealt(5 good#illcontentment5 or eLciency of its employees.Furt(er extending t(e exemption to a\maximum num$er of /0 days and e)en up to

;0Q of all earned lea)e credits\ #ouldmaterially depart from t(e \de minimis\concept and (ence t(e exemption re?uested#ould $e $eyond t(e aut(ority of t(e B6R torecogniHe. *B6R Ruling No. 0'; dated<eptem$er 2"5 2000

x------------------------------------x

/./.2 Rice

B/R Ruling No. *A$100 ;ABB 6roup o# Companies<

(is refers to your follo# up letter dated=arc( "5 2000 correcting your original re?uestdated Danuary 205 2000 for exemption fromfringe $enet and #it((olding tax oncompensation of meal allo#ance in t(eamount of P%;0.00 per mont( to $e gi)en toall t(e employees of BB group of companiesin t(e P(ilippines to t(at of one *1 sac3 of rice.

6t #as originally represented t(at BB groupof companies in t(e P(ilippines are composedof sea Bro#n Bo)eri5 6nc.5 BB Po#er5 6nc.5BB 6ndustry and BB Xoppel5 6nc.4 t(at of t(efour companies5 BB 6ndustry and BB Xoppel(a)e unioniHed la$or organiHation #(ere$y

t(ey #ere a$le to negotiate t(e grant of mont(ly meal allo#ance of P(p%;0.00 *ormore or less P/".;' per day4 and t(at t(ene# management plans to standardiHe t(e$enets to all BB employees in t(eP(ilippines5 including t(e employees of non-unioniHed companies5 namely5 sea Bro#nBo)eri5 6nc. and BB Po#er5 6nc.5 $y granting ameal allo#ance in t(e amount of P%;0.00 permont(5 to promote t(e (ealt(5 contentment5eLciency and good #or3ing relations #it( t(eemployees.

6n reply5 please $e informed t(at facilities orpri)ileges *suc( as entertainment5 medicalser)ices5 or so called courtesy discounts onpurc(ases furnis(ed or oKered $y anemployer to (is employees5 generally5 are notconsidered as compensation su$ect to#it((olding tax if suc( facilities or pri)ilegesare of relati)ely small )alue and are oKered orfurnis(ed $y t(e employer merely as a meansof promoting t(e (ealt(5 good#ill5contentment5 or eLciency of (is employees

pursuant to Re)enue Regulations No. 2-%&5 asamended $y Re)enue Regulations No. /-%&implementing <ection /2*B*A*e*i) of t(e1%%A ax +ode.

<uc( $eing t(e case5 a sac3 of rice #(ic( BBgroup of companies in t(e P(ilippines agreedto gi)e to t(eir employees5 is not considered#ages. ccordingly5 t(e same is not su$ect tot(e #it((olding tax prescri$ed $y <ection A%in relation <ec. 2'*5 $ot( of t(e same ax

$"





+ode of 1%%A5 since t(e said allo#ance isrelati)ely of small )alue and oKered $y t(erespecti)e employer to promote (ealt(5good#ill5 contentment and eLciency of itsemployees. *B6R Ruling C-02"-%% dated Danuary 1&5 1%%%

=oreo)er5 a sac3 of rice #(ic( BB group of companies agreed to gi)e to all t(eiremployees5 is not su$ect to t(e fringe$enets tax pursuant to <ection //*+ of t(e1%%A ax +ode5 as implemented $y <ection2.//*+ of Re)enue Regulations No. /-%&.

ccordingly5 a sac3 of rice granted to t(e ran3and le employees of BB group of companiesin t(e P(ilippines5 in suc( amount as may $eallo#a$le under existing rules and regulations

is not su$ect to t(e fringe $enet tax t(esame $eing of relati)ely small )alue. ,i3e#ise5if t(e same $enet5 i.e.5 sac3 of rice in t(eamount of P/;0.00 per mont( is oKered tosuper)isory5 professional or tec(nicalemployees5 it s(all not $e su$ect to t(e fringe$enets tax it $eing considered de minimis$enet. *B6R Ruling No. 0"1-%% dated =ay ;51%%%

B/R Ruling No. *A0@01 ;ames Kardie 'hilippines /nc.<

(is refers to your letter dated =arc( /052000 re?uesting for a ruling on #(et(er t(egrant of rice allo#ance $y your company to itsemployees is exempt from t(e Fringe Benet ax *FB.

6t is represented t(at your company intends topro)ide all your employees #it( riceallo#ance of P15/00.00 per ?uarter*eKecti)ely P'//.// per mont( regardless of ran3ing and position i.e. including super)isors

and managers4 and t(at on a ?uarterly $asis5you #ill include in t(e employees payroll t(eP15/00.00 as rice allo#ance.

Based on t(e foregoing5 you no# re?uest for aruling on t(e follo#ing:

1. For super)isors and managers5 can #ere?uest t(at t(e total amount of riceallo#ance of P15/00.00 per ?uarter orP'//.// per mont( $e considered as \Ce=inimis\5 t(at is5 #ill not $e su$ect to FringeBenet ax considering t(e current cost of onesac3 of rice8

2. For ran3 and le employees5 (o# #ould#e treat t(e P 15/00.00 rice allo#ance per?uarter8 Would t(is fall under t(e $enet of

relati)ely small )alue exempt from#it((olding tax on compensation8 r #ould it$e part of t(eir compensation income su$ectto tax. 6f yes5 t(en t(at #ould $ring us to ournext ?uestion.

/. W(at #ould you suggest is t(e $est set upin order for our employees5 especially t(eran3 and le5 to t(in3 t(at t(e company is fairto all8

6n reply5 please $e informed t(at pursuant to

<ection 2.A&.1 **/ of Re)enue RegulationsNo. 2-%&5 facilities and pri)ileges *suc( asentertainment5 medical ser)ices5 or so called\courtesy\ discounts on purc(ases5 furnis(edor oKered $y an employer to (is employeesgenerally5 are not considered ascompensation su$ect to #it((olding tax if suc( facilities or pri)ileges are of relati)elysmall )alue and are oKered or furnis(ed $yt(e employer merely as a means of promoting

$#





t(e (ealt(5 good#ill5 contentment5 oreLciency of (is employees.

=oreo)er5 pursuant to <ection // *+ of t(e ax +ode of 1%%A as implemented $y <ection2.// *+ of Re)enue Regulations No. /-%&5

your ?ueries are ans#ered as follo#s:

1. Rice allo#ance granted to t(e super)isorsand managers of Dames 9ardie P(ilippines56nc. in t(e amount of P15/00 per ?uarter isconsidered as a \de minimis\ $enet andt(erefore5 not su$ect to t(e Fringe Benet axunder <ection // of t(e ax +ode of 1%%A.

2. Rice allo#ance granted $y Dames 9ardieP(ilippines5 6nc. to its ran3 and le employeesin t(e amount of P15/00 per ?uarter5 is

li3e#ise5 considered as of relati)ely small)alue5 and is oKered or furnis(ed $y t(eemployer merely as a means of promoting t(e(ealt(5 good#ill5 contentment or eLciency of (is employees. *B6R Ruling C-12A-2000dated =arc( 015 2000

x------------------------------------x

/././ 4eal Allowance

B/R Ruling No. 01 ;'etron Corporation<

INCOME TAJ O#e!%)e Meal Alloa$ce - (e o)ertime meal allo#ances of P&0.00P%0.00P100.00 gi)en $y Petron to itsran3 and le employees5 #(o (a)e actuallyrendered o)ertime #or35 are not consideredas part of compensation su$ect to#it((olding tax since t(e same are of relati)ely small )alue. ,i3e#ise5 t(e o)ertimemeal allo#ance of ne (undred fty pesos*P1;0.00gi)en to super)isory5 professional

and tec(nical employees are not consideredas part of compensation su$ect to#it((olding tax since suc( o)ertime mealallo#ances are furnis(ed to t(e employees fort(e con)enience of Petron.

=oreo)er5 t(e said o)ertime meal allo#ancesgranted to ran3 and le employees and tosuper)isory5 professional and tec(nicalemployees are not su$ect to t(e fringe$enets tax pursuant to <ection // *+ of t(e ax +ode of 1%%A as implemented $y <ection2.// *+ of Re)enue Regulations No. /-%&.

6n ne5 t(e o)ertime meal allo#ances grantedto t(e ran3 and le employees are not su$ectto t(e fringe $enets tax as t(ese arespecically exempted from t(e application

t(ereof. ,i3e#ise5 t(e o)ertime mealallo#ances granted to t(e super)isory5professional and tec(nical employees are notsu$ect to t(e fringe $enets tax since t(esame are granted to t(e employees asre?uired $y t(e nature of5 or necessary toyour trade5 or $usiness and for yourcon)enience. *B6R Ruling No. 0"1-%% dated=ay ;5 1%%%

x------------------------------------x

/./.' /ncenti&e gi&en to aculty 4embers doing Research'ro"ects

B/R Ruling No. 1$O ;*e la ,alle 5ni&ersity<

INCOME TA - <ection 2.A% of Re)enueRegulations No. 2-%&5 pro)ides t(at e)eryemployer must #it((old from compensationpaid5 an amount computed in accordance #it(t(ese regulations. Pro)ided5 t(at no#it((olding of tax s(all $e re?uired #(ere t(e

$$





total compensation income of an indi)idualdoes not exceed t(e statutory minimum #ageof )e t(ousand pesos *P;5000.00 mont(ly orsixty t(ousand pesos *P"05000.00 a year5#(ic(e)er is (ig(er. (e term \employer\ isdened as any person paying compensation

on $e(alf of a non-resident alien indi)idual5foreign partners(ip5 or foreign corporation5#(o is not engaged in trade or $usiness#it(in t(e P(ilippines pursuant to <ection2.A&.'*B of t(e said Re)enue Regulations.

(e income earned $y t(e proect staK of t(eCe ,a <alle are compensation income #(ereint(e ni)ersity (as t(e responsi$ility of #it((olding t(e tax as an employer payingcompensation on $e(alf of a non- residentalien indi)idual5 foreign partners(ip5 or foreign

corporation5 #(o is not engaged in trade or$usiness #it(in t(e P(ilippines. (e incenti)e gi)en to faculty mem$ers of Ce,a <alle ni)ersity #(o are doing researc(proects for t(e ni)ersity can $e e?uated to aproducti)ity incenti)e and a producti)ityincenti)e is a fringe $enet. For super)isoryand managerial employees5 one of t(e fringe$enets t(at is not su$ect to t(e fringe$enets tax are \de minimis $enets.\

(e producti)ity incenti)e gi)en is no longer

su$ect to t(e P125000.00 t(res(old $ut t(esame5 plus t(e 1/t( mont( pay not exceedingP/05000.00 are excluded from gross incomeand t(erefore exempt from taxation pursuantto <ection /2 *B*A*e of t(e ax +ode of 1%%A. 6n excess t(ereof t(ere s(all $eimposed a nal tax of /'Q $eginning Danuary15 1%%&5 //Q $eginning Danuary 15 1%%% and/2Q $eginning Danuary 15 2000 andt(ereafter5 on t(e grossed-up monetary )alueof fringe $enets pursuant to <ection // of

t(e ax +ode of 1%%A and its implementingregulations.

6n general5 t(e relations(ip of t(e employerand employee exists #(en t(e person for#(om ser)ices #ere performed (as t(e rig(t

to control and direct t(e indi)idual #(operforms t(e ser)ices5 not only as to t(eresult to $e accomplis(ed $y t(e #or3 $utalso as to t(e details and means $y #(ic( t(eresult is accomplis(ed. n employee issu$ect to t(e #ill and control of t(e employernot only as to #(at s(all $e done5 $ut (o# its(all $e done. 6n t(is connection5 it is notnecessary t(at t(e employer actually directsor controls t(e manner in #(ic( t(e ser)icesare performed. 6t is suLcient t(at (e (as t(erig(t to do so.

(e fact (o#e)er t(at t(e +oac(es and R++ommandant do not enoy t(e $enets of a$ona-de employee of Ce ,a <alle ni)ersitydoes not at all aKect C,< $eing t(e#it((olding agent of t(e Bureau of 6nternalRe)enue $ecause it is in fact t(e incomepayor of t(e said coac(es and commandantand is fully responsi$le for t(e ser)icesperformed $y t(em on its $e(alf. (erefore5 if t(e ?ualied faculty mem$er is an o)erseascontract #or3er #(ic( #or3 contract passes

t(ru t(e P(ilippine )erseas >mploymentgency *P>5 t(e income t(at #ill $erecei)ed $y t(e said ?ualied facultymem$ers are considered income not #it(int(e P(ilippines5 not su$ect to tax5 (ence5 t(eni)ersity is not under o$ligation to #it((oldincome tax.

n t(e ot(er (and5 if t(e ?ualied facultymem$er is considered as a non-residentcitiHen5 t(en (e is taxa$le only on income

$%




y gy

deri)ed from sources #it(in t(e P(ilippines. (us5 income earned $y a non-resident citiHena$road is exempt from income tax.

n employer may $e an indi)idual5 acorporation5 a partners(ip5 a trust5 an estate5

a oint-stoc3 company5 an association5 or asyndicate5 group5 pool5 oint )enture5 or ot(erunincorporated organiHations5 group or entity. trust or estate5 rat(er t(an t(e duciaryacting for or $e(alf of t(e trust or estate5 isgenerally t(e employer. 6t can $e inferred t(ata trust (ad $een created $et#een t(eni)ersity and t(e local companies in fa)or of t(e faculty mem$ers5 and $et#een t(eni)ersity and t(e graduate sc(ool studentsin fa)or of t(e said faculty. 9ence5 it is t(etrust t(at is t(e employer and not t(e

ni)ersity #(ic( only acts as an agent orduciary.

Nonet(eless5 $eing t(e agent5 duciary orot(er person #(o (as t(e control5 receipt5custody or disposal of5 or pays t(ecompensation paya$le $y anot(er employerto suc( employee5 t(e amount of tax re?uiredto $e #it((eld on eac( compensationpayment made t(roug( an agent5 duciary5 orperson s(all5 #(et(er t(e compensation ispaid separately on $e(alf of all suc(

employers5 $e determined $ased on t(eaggregate amount of suc( compensationpayment or payments in t(e same manner asif suc( aggregate amount (ad $een paid $yone employer. <ince t(e ni)ersity (as t(econtrol5 receipt5 custody or disposal of or ist(e one #(o pays t(e compensation paya$le$y anot(er employer5 t(e ni)ersity is undero$ligation to #it((old t(e correspondingincome tax and remit t(e same to t(e Bureauof 6nternal Re)enue on $e(alf of t(e said

employers. *B6R Ruling No. 12&-%% datedugust 1&5 1%%%

x------------------------------------x

/./.; 4edical Bene!ts

B/R Ruling No. *A0O10 ;Lacson 9 Lacson /nsurance Brokers<

(is refers to your letter dated Cecem$er 2A52002 re?uesting clarication on t(e follo#ing:

*1 6f non-insured in medical $enets pro)ided$y an employer to its employees and t(eirdependents are su$ect to tax4 and

*2 6f an employer decides to $uy medicalinsurance for its employees and t(eir

dependents5 are t(e insurance premiumssu$ect to tax.

6n reply t(ereto5 please $e informed t(at<ection // of t(e ax +ode of 1%%A pro)idest(at a nal tax of /2Q $eginning Danuary 152000 s(all $e imposed on t(e grossed-upmonetary )alue of fringe $enet furnis(ed orgranted to t(e employee *except ran3 and leemployees $y t(e employer5 #(et(er anindi)idual or a corporation *unless t(e fringe$enet is re?uired $y t(e nature of5 or

necessary to t(e trade5 $usiness or professionof t(e employer5 or #(en t(e fringe $enet isfor t(e con)enience or ad)antage of t(eemployer.

(e term \fringe $enet\ means any good5ser)ice or ot(er $enet furnis(ed or grantedin cas( or in 3ind $y an employer to anindi)idual employee *except ran3 and leemployees suc( as life or (ealt( insuranceand ot(er non-life insurance premiums or

$&




y gy

similar amounts in excess of #(at t(e la#allo#s.

n t(e ot(er (and5 t(e term \de minimis\$enets #(ic( are exempt from t(e fringe$enet tax s(all5 in general5 $e limited to

facilities or pri)ileges furnis(ed or oKered $yan employer to (is employees t(at are of relati)ely small )alue and are oKered orfurnis(ed $y t(e employer merely as a meansof promoting t(e (ealt(5 good#ill5contentment5 or eLciency of (is employees5suc( as actual yearly medical $enets notexceeding P105000.00 per annum. *Re)enueRegulations No. 10-20006t is clear from t(e a$o)e-cited pro)isions t(atfringe $enet taxes are imposed on t(e$enets pro)ided $y an employer to its

managerial and super)isory employees. (us5$enets granted to ran3 and le employeesare not su$ect to fringe $enet tax5 $ut mayform part of t(e compensation of t(e said*ran3 and le employees su$ect to#it((olding tax on compensation5 except#(en t(ey are specically exempt orconsidered as de minimis $enets. 9o#e)er5t(e excess of t(e de minimis )alue s(all $esu$ect to tax on compensation if granted toran3 and le employees and to fringe $enettax if granted to managerial and super)isory

employees.

ccordingly5 in applying t(e said pro)isions tot(e a$o)e issues raised5 t(is Lce (olds t(at]

1. 6f t(e medical $enets granted do notexceed P105000.00 per annum5 t(e same s(all$e considered as de minimis $enets t(at arenot su$ect to income tax as #ell as to#it((olding tax on compensation income of

$ot( managerial and ran3 and le employees.9o#e)er5 if t(e employer pays more t(an t(eceiling of ot(er $enets pro)ided in <ection/2*B*A*e of t(e ax +ode of 1%%A5 t(eexcess s(all $e taxa$le to t(e employeerecei)ing t(e $enets only if suc( excess is

$eyond t(e P/05000.00 ceiling5 i.e.5 if pertaining to super)isory or managerialemployees5 t(e excess s(all $e su$ect tofringe $enet tax #(ile t(ose pertaining toran3 and le employees5 t(e excess s(all $esu$ect to #it((olding tax on compensation.9ence5 t(e medical $enets pro)ided $y t(eemployer to its employees in excess of t(eamount considered as de minimis is su$ect toeit(er fringe $enet tax or income tax oncompensation.

2. ,ife or (ealt( insurance and ot(er non-lifeinsurance premiums or similar amounts inexcess of #(at t(e la# allo#s s(all $e su$ectto fringe $enet tax *<ec. 2.//*B*105Re)enue Regulations No. /-%&5 except *acontri$utions of t(e employer for t(e $enetof t(e employee5 pursuant to t(e pro)isions of existing la#5 suc( as under t(e <ocial <ecurity<ystem *<<< or Go)ernment <er)ice6nsurance <ystem *G<6< or similarcontri$utions arising from t(e pro)isions of any ot(er existing la#4 and *$ t(e cost of

premiums $orne $y t(e employer for t(egroup insurance of (is employees. +orollarily5<ection /2*B*A*f of t(e ax +ode of 1%%Apro)ides t(at G<6<5 <<<5 =edicare and Pag-6$ig +ontri$utions5 and union dues of indi)iduals s(all $e excluded from grossincome. ccordingly5 #(ere t(e employerdecides to $uy medical insurance for itsemployees5 #(et(er ran3 and le orsuper)isory5 and t(eir dependents5 t(einsurance premiums paid $y t(e employer

%0




y gy

s(all $e excluded from gross income andt(erefore not su$ect to #it((olding tax. nt(e ot(er (and5 t(e premiums paid $y t(eemployer s(all $e deducti$le from its grossincome as $usiness expense under <ection /'of t(e ax +ode of 1%%A. =oreo)er5 t(e same

rule as stated in Num$er *1 a$o)e #ill apply5#(en an employer granting insurance$enets to its employees5 #(et(ersuper)isory or ran3 and le5 #ill $uyinsurance directly from an insurancecompany.

x------------------------------------x

/./." 8arious Bene!ts

B/R Ruling No. *A@0 ;/nternational la&ors and ragrances

/nc.<

6n reply5 please $e informed t(at t(e follo#ingrules s(all generally apply in considering t(etax conse?uences of certain $enets gi)en $yemployers to t(eir employees5 #(et(er ran3-and-le5 super)isory or managerial.

1. Facilities or pri)ileges t(at are categoriHedde minimis $enets under pertinent rules andregulations s(all not $e included as items of gross income for income tax purposes. (ey

s(all not also $e included in t(e computationof t(e P/05000.00 t(res(old for adetermination of t(e items of income t(at areto $e excluded from income under <ection/2*B*A*e of t(e ax +ode of 1%%A.

2. +orollary to t(is5 de minimis $enets aresu$ect to neit(er income tax oncompensation nor fringe $enets tax.Furt(ermore5 no #it((olding tax t(ereon s(all

$e imposed in )ie# of t(eir exclusion andexemption from tax.

/. (e gross $enets granted to ran3-and-le5 super)isory or managerial employees of entities5 to t(e extent of t(e t(res(old of

P/05000.00 mandated $y <ection /2*B*A*eof t(e ax +ode of 1%%A5 s(all not $e includedas items of gross income and s(all5 t(erefore5$e exempt from income taxation. ccordingly5suc( $enets gi)en in excess of t(e t(res(oldamount s(all $e taxa$le to t(e recipientemployee.

'. (e \ot(er $enets\ referred to in <ection/2*B*A*e*i) of t(e ax +ode of 1%%A includeall $enets5 ot(er t(an t(e 1/t( mont( pay5suc( as5 t(e annual +(ristmas $onus gi)en $y

pri)ate entities5 1't( mont( pay and t(e li3e5gifts in cas( or in 3ind and ot(er similar$enets and refer to t(ose $enets recei)ed$y an employee in a calendar year.

;. Re)enue Regulations No. /-%&5 asamended $y Re)enue Regulations No. &-2000and Re)enue Regulations No. 10-2000 areillustrati)e and non-exclusi)e in t(eenumeration of #(at constitutes de minimisfringe $enets. ccordingly5 #e rule t(at t(emeal and food $enets granted5 alt(oug( not

intended to $e used for o)ertime #or35 maystill $e added in t(e enumeration of deminimis fringe $enets. 9o#e)er5 in terms of de minimis t(res(old for regular meal andfood $enet5 t(e ceiling for $enets of similarnature under Re)enue Regulations No. &-2000and Re)enue Regulations No. 10-2000 s(ould$e used as guidelines. <uc( $eing t(e case5meal and food $enets not exceeding 2;Q of t(e daily minimum #age may $e consideredde minimis meal $enet and t(erefore5 tax

%1




exempt. (e excess o)er t(is amount s(all $econsidered ot(er $enets as contemplatedunder <ection /2*B*A*e*i) of t(e ax +odeof 1%%A. (e excess of t(e meal and foodallo#ance gi)en o)er t(e de minimis ceilings(all still $e exempt pro)ided t(at it5 toget(er

#it( t(e total amount of ot(er $enets5 s(allnot exceed P/05000.00 *B6R Ruling No. 2/-2002 dated Dune 215 2002.

". 6n 3eeping #it( t(e spirit of t(e rules andregulations on de minimis $enets5 #e rulet(at t(ere can $e no aggregation of t(e)alues set for eac( item of $enet stated inRe)enue Regulations Nos. 2-%& and /-%&5 asamended $y Re)enue Regulations Nos. &-2000 and 10-2000. (e intent of t(eRegulations is to treat eac( item of de

minimis $enet independently of eac( ot(er5and #e (a)e to gi)e life to t(at intent. (us5t(e Regulations separately pro)ide maximum)alues for rice allo#ance and for mealallo#ance. ccordingly5 t(ere can $e noaggregation of de minimis )alues for rice andmeal and food $enets *B6R Ruling No. 2/-2002 dated Dune 215 2002.

6n addition to t(e foregoing5 it is t(e rule t(att(e fringe $enets tax is a nal tax on t(eemployee5 ot(er t(an a ran3-and-le

employee5 t(at s(all $e #it((eld and paid $yt(e employer on a calendar ?uarterly $asis aspro)ided under <ection ;A* of t(e ax +odeof 1%%A. Being a nal tax5 (o#e)er5 t(eamount of fringe $enets gi)en s(all not $ereported as income for t(e concernedemployeeZs annual tax return consolidation.

n t(e $asis of t(e foregoing and according tot(e pertinent Re)enue Regulations on t(e

matter5 #e proceed to rule on t(e particularissues raised for our consideration.

1. Ce =inimis Benets.

a. =edical Benets

Ce =inimis $enets are non-taxa$le fringe$enets. ccordingly5 <ection 2.A%*C*/*d of Re)enue Regulations No. 2-%&5 as amended5pro)ides t(at \fSor purposes of determining#(et(er t(e fringe $enet s(all $e consideredpayment of de minimis $enets5 t(e employers(all su$mit a #ritten representation to t(e+ommissioner for t(e issuance of a rulingta3ing into account t(e peculiar nature andspecial need of t(e said employerZs trade5$usiness or profession.\

Re)enue Regulations No. &-20005 as amended$y Re)enue Regulations No. 10-20005recogniHe actual yearly medical $enets notexceeding P105000.00 per annum as deminimis.

n t(is $asis5 t(e grant of medical $enetsconsisting of medicine allo#ance to co)ermedical and (ealt(care needs4 annualmedicalexecuti)e c(ec3-up4 and routineconsultations to your employees s(all $e

considered de minimis to t(e extent of t(emaximum amount of P105000.00 per annumof medical $enets5 ta3en toget(er #it( allt(e ot(er medical $enets pro)ided to suc(employees.

$. Rice llo#ance

(e rice allo#ance $enet in t(e amount of P%2.00 per mont( is #it(in t(e limitation set$y Re)enue Regulations No. /-%&5 as

%2




amended $y Re)enue Regulations No. &-2000and 10-2000. ccordingly5 t(e rice allo#ancein t(e amount of P%2.00 per mont( is su$ectto neit(er income tax on compensation norfringe $enets tax.

c. =eal llo#ance

For a meal allo#ance to $e considered deminimis5 only suc( daily meal allo#ance foro)ertime #or3 not exceeding 2;Q of t(e $asicminimum #age5 on a per region $asis or int(is case5 t(e National +apital Region5 s(all $erecogniHed and allo#ed *Re)enue RegulationsNo. &-20005 as amended $y Re)enueRegulations No. 10-2000. (e elements of t(e $enet are as follo#s:

i. (e meal allo#ance is $eing gi)en on

t(e occasion of o)ertime #or34ii. (e amount must $e computed on a

daily $asis4 andiii. (e amount must not exceed 2;Q of

t(e minimum #age applica$le in t(earea *B6R Ruling No. C2;0-02 datedCecem$er 1&5 2002.

6n respect to t(e P;".00 per #or3ing day mealallo#ance gi)en to your employees #(ic( isnot intended to $e used for o)ertime #or35t(e same may still $e added in t(e

enumeration of de minimis fringe $enets. (e portion of t(e meal allo#ance notexceeding 2;Q of t(e daily minimum #agemay $e considered de minimis meal $enet5and t(erefore5 tax exempt. (e excess o)ert(is amount s(all $e considered as \ot(er$enets\ as contemplated under <ection/2*B*A*e*i) of t(e ax +ode of 1%%A. (eexcess of t(e meal allo#ance gi)en o)er t(ede minimis ceiling s(all still $e exemptpro)ided t(at it5 toget(er #it( t(e total

amount of ot(er $enets5 s(all not exceedP/05000.00 *B6R Ruling No. 2/-2002 dated Dune 215 2002.

d. +(ristmas Gift +(ec3

(e +(ristmas gift c(ec3s ranging fromP&00.00UP/5000.00employee per annum are#it(in t(e limitation set $y Re)enueRegulations No. /-%&5 as amended $yRe)enue Regulations No. &-2000 and Re)enueRegulations No. 10-2000. ccordingly5 t(e+(ristmas gift c(ec3s ranging from P&00.00UP/5000.00employee per annum are notsu$ect to income tax nor to t(e fringe$enets tax.

e. +lot(ing llo#ance

o t(e extent of P/5000.00 per annum5 anypro)ision for uniform and clot(ing allo#ances(all $e considered de minimis $enet. Byimplication t(e excess of P/5000.00 granted toall your employees as clot(ing allo#ance s(allno longer $e de minimis and t(erefore5 s(allaccordingly $e su$ect to t(e appropriateincome tax5 #(ic( s(all $e discussed(ereafter *Re)enue Regulations No. &-20005as amended $y Re)enue Regulations No. 10-2000.

2. Benets >xcluded from 6ncome under<ection /2*B*A*e of t(e ax +ode of 1%%A.

Gross $enets5 not exceeding P/05000.005t(at are recei)ed $y oLcials and employeesof pu$lic and pri)ate entities are not includedin gross income for purposes of computing t(erecipientZs applica$le taxes under itle 66*6ncome ax of t(e ax +ode of 1%%A. mong

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t(ose enumerated are \ot(er $enets suc( asproducti)ity incenti)es and +(ristmas $onus.\

6n t(is regard5 #e nd t(at t(e $irt(day giftusually in t(e form of $irt(day ca3e5 ice creamandor noodles is considered \ot(er $enets.\

ccordingly5 t(e amount of P';0.00 $irt(daygift gi)en to employees s(ould $e included int(e consideration of t(e amount of gross$enets not to $e reported as taxa$le incomeunder t(e afore-stated ax +ode pro)ision.

/. Fringe Benets )is--)is +ompensation6ncome.

<ection 2.//*+ of Re)enue Regulations No. /-%&5 as amended pro)ides5 )iH:\*+ Fringe Benets Not <u$ect to Fringe

Benets ax ] 6n general5 t(e fringe $enetstax s(all not $e imposed on t(e follo#ing$enets:xxx xxx xxx*/ Benets gi)en to t(e ran3 and le5#(et(er granted under a collecti)e $argainingagreement or not4xxx xxx xxx*" 6f t(e grant of t(e fringe $enets is for t(econ)enience of t(e employer.\

ccordingly5 if t(e transportation allo#ance in

t(e amount not exceeding PA0.00P1'0.00and t(e annual credit card fees forrepresentation expenses gi)en to yoursuper)isory and managerial employees arepro)ided for 6FFZs con)enience and $enet5t(e said transportation and representationexpenses are not su$ect to fringe $enets taxpursuant to <ection 2.//*+ of Re)enueRegulations No. /-%&5 as amended.

9o#e)er5 if t(e a$o)e-mentionedtransportation and representation allo#ancesare xed in amounts and are regularlyrecei)ed $y t(e employees as part of t(eirmont(ly compensation income5 t(e sames(all not $e treated as taxa$le fringe $enets

$ut t(e same s(all $e treated as allo#ances#(ic( s(all form part of t(eir taxa$lecompensation income su$ect to income taxand conse?uently to t(e #it((olding taxprescri$ed under <ection A% of t(e ax +odeof 1%%A *B6R Ruling No. 02;-01 dated Dune 1/52001.

=oreo)er5 any amount paid specically5 eit(eras ad)ances or reim$ursements for tra)eling5representation and ot(er $ona de ordinaryand necessary expenses incurred or

reasona$ly expected to $e incurred $y t(eemployee in t(e performance of (is duties arenot compensation su$ect to #it((olding5 if t(e follo#ing conditions are satised:

*i 6t is for ordinary and necessarytra)elling and representation orentertainment expenses paid orincurred $y t(e employee in t(epursuit of t(e trade5 $usiness orprofession4 and

*ii (e employee is re?uired toaccountli?uidate for t(e foregoingexpenses in accordance #it( t(especic re?uirements of su$stantiationfor eac( category of expensespursuant to <ec. /' of t(e +ode. (eexcess of ad)ances made o)er actualexpenses s(all constitute taxa$leincome if suc( amount is not returnedto t(e employer. Reasona$le amountsare pre-computed on a daily $asis and

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percent *"0Q of t(e cost is recorded as assetand depreciated for ri)e *; years in t(e $oo3sof accounts4 t(at forty percent *'0Q of t(ecost is recorded as recei)a$le from t(eemployee and collected #it(in )e *; yearsinterest-free4 and t(at at t(e end of t(e )e

*; year period5 #(en sixty percent *"0Q of t(e cost of t(e ear is fully depreciated and t(eforty percent *'0Q s(are of t(e employee isfully paid5 title is transferred to t(e employee.

(e fringe $enet in t(is particular case is to$e computed as follo#s:

c?uisition cost x "0Q x ;0QV nnual FB on motor )e(icle ; Eears

dditionally5 t(e company is furt(er lia$le to

fringe $enets tax under <ection 2.//*B*;*aon interest free loan to t(e employeecomputed at t(e $enc(mar3 interest rate of t#el)e percent per annum. (us5 t(e annualfringe $enet tax on interest-free loan for t(e'0Q of t(e ac?uisition cost of t(e car s(ouldli3e#ise $e computed5 as follo#s:

'0Q of t(e ac?uisition cost x 12Q p.a. x ;yearsV nnual FB on interest ; Eears

*B6R Ruling No. 0A"-%% dated Dune 1"5 1%%%

B/R Ruling No. *A00@0D ;Cargill 'hilippines /nc.<

(is refers to your letter dated ugust 2A5200/ re?uesting for a clarication for t(etaxa$ility of t(e employerZs ;0Q s(are in acar program for your sales personnel.

6t is represented t(at you are a companyengaged in t(e manufacture and distri$ution

of animal feeds4 t(at t(e company eit(erleases or ma3es outrig(t purc(ases of )e(icles for its salesmenZs use4 t(at you (a)ea car program for your sales people: t(at t(ecompany s(ares A0Q of t(e lease cost andt(e employee5 /0Q4 t(at oLcial use s(all ta3e

precedence o)er personal use4 and t(at t(e)e(icle is in t(e name of t(e company $ut att(e end of t(e lease term5 o#ners(ip istransferred to t(e employee.

6n reply5 please $e informed t(at <ection2.//*B*/*f of Re)enue Regulations No. /-%&implementing <ection // of t(e ax +ode of 1%%A5 reads:

\f 6f t(e employer leases and maintains a[eet of motor )e(icles for t(e use of t(e

$usiness of t(e employer5 t(e )alue of t(e$enet s(all $e t(e amount of rentalpayments for motor )e(icles not normallyused for sales5 freig(t5 deli)ery ser)ices andot(er non-personal use. (e monetary )alueof t(e fringe $enet s(all $e fty percent*;0Q of t(e )alue of t(e $enet.\

<uc( $eing t(e case5 and since you re?uireyour sales personnel to s(are at least /0Q of t(e mont(ly rental and deducted from t(eirpayroll su$ect to t(e #it((olding tax on

compensation5 t(is Lce is of t(e opinion asit (ere$y (olds t(at only 20Q of t(e mont(lycar rental is taxa$le as fringe $enet taxinasmuc( as t(e /0Q s(are of t(e employee(as already $een taxed as compensation.

x------------------------------------x

/.'.2 GTuition +ai&er Bene!t=H ducational Assistance toaculty

membersI children

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1. N>+ o3in is a corporation duly organiHedand existing under and $y )irtue of t(e la#sof t(e P(ilippines. 6ts principal oLce addressis at 1 Ring Road5 ,ig(t 6ndustry 7 <ciencePar3 *,6<P 665 Barangay ,a =esa5 +alam$a5

,aguna. 6t is registered #it( t(e P(ilippine>conomic _one ut(ority *P>_ as an>coHone >xport >nterprise pursuant to its+ertication of Registration No. 02-0'/. ndert(e Registration greement5 t(e companyZsregistered acti)ity \s(all $e limited to t(emanufacture of electro mec(anical de)ice asrelay and ot(ers5 and t(e importation of ra#materials5 mac(inery5 e?uipment5 tools5goods5 #ares5 articles or merc(andise directlyused in its registered operations.\

2. N>+ o3in pro)ides group (ospitaliHation$enets to its non-ran3 and le employeesunder a 9= plan pro)ided $y 9ealt(=aintenance5 6nc. (e company s(oulders t(eentire amount of 9= premiums co)ering itsnon-ran3 and le employees pursuant to t(isgroup (ealt( insurance. (e plan iscompulsory5 meaning t(at t(e employee (asno option not to $e co)ered $y t(e group(ealt( insurance plan. 9o#e)er5 t(e 9= plan(as no paid-up )alue to t(e employee.

/. Furt(ermore5 under t(e arrangement #it(9ealt( =aintenance5 6nc.5 a maximum of t(ree*/ dependents of t(e non-ran3 and leemployees are enrolled under t(e 9= plan.6n t(e case of assistant managers5 N>+ o3ins(oulders t(e entire amount of t(e 9=premiums co)ering t(eir dependents. 6n t(ecase of super)isors5 N>+ o3in ad)ances t(e9= premiums co)ering t(eir dependentsand collects t(e same t(roug( salarydeductions o)er a period of one year.

6n connection t(ere#it(5 you no# re?uest fora conrmation t(at:

1. Premium payments made $y N>+ o3in to9ealt( =aintenance5 6nc. pursuant to its group

(ealt( insurance plan for its employees arenot su$ect to FB.

2. Premium payments made $y N>+ o3in to9ealt( =aintenance5 6nc. pursuant to its group(ealt( insurance plan for t(e dependents of its assistant managers to t(e extent of P15;00 per employee per year are not su$ectto FB.

/. Premium payments made $y N>+ o3in to9ealt( =aintenance5 6nc. pursuant to its group

(ealt( insurance plan for t(e dependents of its super)isors5 #(ic( payments are later paid$y said employees5 are not su$ect to FB.

6n reply t(ereto5 please $e informed asfollo#s:

1. n t(e rst issue

Re)enue Regulations No. /-%&5 #(ic(implements t(e a$o)e pro)ision of t(e ax+ode5 pro)ides t(at t(e cost of group life

insurance premiums $orne $y t(e employerfor (is employee s(all $e considered as a non-taxa$le fringe $enet.

Although technically a health 'aintenanceorgani(ation )*+, is not an insurance co'anysu/ect to registration an regulation /y theinsurance Co''ission the ser3ice renere /ysuch *+,s are a4in to the ser3ice ro3ie /yinsurance co'anies.

%%






#or3ers *rticles 115 <ections 1; and 1& of t(e 1%&A +onstitution and t(e constitutionalmandate guaranteeing full protection to la$or*rt. 1/5 <ections / and 1'5 i$id.5 t(issituation falls #it(in t(e pur)ie# of <ection //of t(e ax +ode of 1%%A. <uc( $eing t(e case5

t(e costs and related expenses associated#it( t(e lease of t(e condominium unit andresidential (ouse for t(e $enet of t(eemployees are expenses directly attri$uta$leto t(e de)elopment5 management5 operationandor conduct of t(e $usiness pursuant to<ection /'**1 of t(e ax +ode5 t(e sames(all $e deducted from t(e gross income of BB Po#er5 6nc. s suc(5 and considering t(atit is a fringe $enet for t(e con)enience andad)antage of t(e employer5 it s(all not $eincluded as part of compensation income of

t(e employee su$ect to #it((olding neit(er#ill it $e su$ect to t(e fringe $enet under<ec. // of t(e ax +ode of 1%%A implemented$y Re)enue Regulations No. /-%&. *B6R RulingNo. 0;;-%% dated pril 2/5 1%%%

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/.'." Kousing 'ri&ilege to (C+

B/R Ruling No. 00%

6n ot(er #ords5 for taxation purposes5 t(egeneral rule is t(at t(e monetary )alue of t(e(ousing $enets to t(e employee s(all $eadded to (is remuneration for t(e purpose of determining t(e gross compensation income5>+>P #(ere t(e li)ing ?uarters arefurnis(ed to (im for (is employerZscon)enience. (e ?uestion of #(en is t(epro)iding of li)ing ?uarters can $e consideredas for t(e employer@s con)enience can $edetermined on #(o #ill $enet more if li)ing

?uarters are pro)ided to an employee. 6n t(isinstant case5 #e are of t(e opinion t(at t(e$enet is more on t(e part of t(e employeerat(er t(an to t(at of t(e employer $ecause#(en an o)erseas contract #or3er appliedand accepted an employment contract

a$road5 (e is a#are t(at (e #ill (a)e to rent a(ouse t(ere. <o t(at if li)ing ?uarters arepro)ided to (im5 t(at #ould mean t(at (e #illnot incur additional expenses for (is li)ing?uarters and t(erefore5 sa)ings on (is part. syou (a)e said5 t(e free accommodationfurnis(ed to =r. =ontoya is part of t(e non-monetary fringe $enets granted to (im asper t(e >mployment +ontract #(ic( isactually an incenti)e #(ic( forms part of (iscompensation and t(at it is pro)ided not fort(e con)enience of t(e employer $ut as part

of t(e compensation pac3age of t(e +W.

6n )ie# t(ereof5 t(is Lce (ere$y concurs#it( your opinion t(at t(e (ousing $enetsgi)en to =r. =ontoya5 an +W in t(e Xingdomof <audi ra$ia5 $eing part of (iscompensation pac3age5 s(ould form part of (is remuneration #(ic( is su$ect to incometax pursuant to <ec. 2*2 of Re)enueRegulations No. "-&25 as amended $yRe)enue Regulations No. 1"-&". *B6R RulingNo. ;%"-&& dated Cecem$er 2/5 1%&&.

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/.'.A 4eal Allowance

B/R Ruling No. 01 ;'etron Corporation<

INCOME TAJ O#e!%)e Meal Alloa$ce - (e o)ertime meal allo#ances of P&0.00P%0.00P100.00 gi)en $y Petron to itsran3 and le employees5 #(o (a)e actually

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rendered o)ertime #or35 are not consideredas part of compensation su$ect to#it((olding tax since t(e same are of relati)ely small )alue. ,i3e#ise5 t(e o)ertimemeal allo#ance of ne (undred fty pesos*P1;0.00gi)en to super)isory5 professional

and tec(nical employees are not consideredas part of compensation su$ect to#it((olding tax since suc( o)ertime mealallo#ances are furnis(ed to t(e employees fort(e con)enience of Petron.

=oreo)er5 t(e said o)ertime meal allo#ancesgranted to ran3 and le employees and tosuper)isory5 professional and tec(nicalemployees are not su$ect to t(e fringe$enets tax pursuant to <ection // *+ of t(e ax +ode of 1%%A as implemented $y <ection

2.// *+ of Re)enue Regulations No. /-%&.

6n ne5 t(e o)ertime meal allo#ances grantedto t(e ran3 and le employees are not su$ectto t(e fringe $enets tax as t(ese arespecically exempted from t(e applicationt(ereof. ,i3e#ise5 t(e o)ertime mealallo#ances granted to t(e super)isory5professional and tec(nical employees are notsu$ect to t(e fringe $enets tax since t(esame are granted to t(e employees asre?uired $y t(e nature of5 or necessary to

your trade5 or $usiness and for yourcon)enience. *B6R Ruling No. 0"1-%% dated=ay ;5 1%%%

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/.'.& Kousing Loan

B/R Ruling No. *A1%00D ;,ony Li#e /nsurance<

(e computation of t(e fringe $enets tax ina situation #(ere t(e company pro)ides itsoLcers #it( a (ousing loan #ould entail *a)aluation of t(e $enet granted and *$determination of t(e proportion or percentageof t(e $enet #(ic( is su$ect to t(e fringe

$enet tax. ccordingly5 t(e monetary )alueof t(e fringe $enet s(all $e t(e entire )alueof t(e $enet regardless of #(et(er t(e (ouseis used $y t(e oLcer partly for (is personalpurpose and partly for t(e $enet of (isemployer pursuant to <ection 2.// of Re)enueRegulations *Re). Regs. No. /-%&5 asamended $y Re). Regs. No. &-2000 and 10-2000. (e )alue of t(e $enet is t(e portionof t(e amount of t(e purc(ase price of t(e(ouse #(ic( amount is s(ouldered $y t(eemployer. n t(e ot(er (and5 #(ere t(e

employer lends money to (is employee for (is(ousing loan at a rate lo#er t(an t#el)epercent *12Q5 t(e diKerence of t(e interestassumed $y t(e employee and t(e rate of t#el)e percent *12Q s(all $e treated as ataxa$le fringe $enet pursuant to <ection2.// of Re). Regs. No. /-%&. *B6R Ruling No.C-11-%A dated ugust 2&5 2000

Fringe $enets means any goods5 ser)ice orot(er $enet furnis(ed or granted $y anemployer in cas( or in 3ind5 in addition to

$asic salaries5 to an employee *except5 ran3and le employee suc( as (ousing $enet.<ection // *a of Repu$lic ct No. &'2'stipulates t(at fringe $enets #(ic( are\re?uired $y t(e nature of5 or necessary to t(etrade5 $usiness or profession of t(e employer5or #(en t(e fringe $enet is for t(econ)enience or ad)antage of t(e employer\are not su$ect to t(e fringe $enet tax. (us5#(ere t(e (ouse is re?uired $y t(e nature of5or necessary to t(e trade5 $usiness or

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profession of t(e employer5 or is for t(econ)enience or ad)antage of t(e employer5t(e $enet s(all not $e su$ect to t(e fringe$enet tax pursuant to <ection // of t(e ax+ode of 1%%A.

(e $enets gi)en to t(e employees pro)idedt(at t(e same fall under t(e denition of ordinary and necessary $usiness expense ast(ose enumerated under <ection /'**1*a*i of t(e same ax +ode5 are considered as)alid deducti$le expenses of t(e +ompany.

6n general5 t(e computation of t(e FB #ouldentail *a )aluation of t(e $enet granted and*$ determination of t(e proportion orpercentage of t(e $enet #(ic( is su$ect tot(e FB. W(ere t(e fringe $enet is granted in

money or is directly paid for $y t(e employer5as in your case5 t(en t(e )alue is t(e amountgranted or paid for pursuant to Re). Reg. No./-%&5 as amended $y Re). Regs. No. &-2000and 10-2000.

(e grossed-up monetary )alue of t(e fringe$enet s(all $e determined $y di)iding t(emonetary )alue of t(e fringe $enet $y "&Q. (e grossed-up monetary )alue of t(e fringe$enet represents t(e #(ole amount of income realiHed $y t(e employee #(ic(

includes t(e net amount of money or netmonetary )alue of property #(ic( (as $eenrecei)ed plus t(e amount of fringe $enet taxt(ereon ot(er#ise due from t(e employee $utpaid $y t(e employer for and in $e(alf of (isemployee.

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/.'.% Transportation Allowance 9 other bene!ts at callcenters

B/R Ruling No. *A$0% ;eTelecare 6lobal ,olutions /nc.<Compare with Re&enue Regulation No. O

6n reply5 please $e informed as follo#s:

ransportation llo#ance

+as( allo#ances gi)en to employees asincenti)es are generally consideredcompensation income su$ect to income taxand #it((olding tax pursuant to <ection2.A&.1 of Re)enue Regulations No. 2-%&5 asamended.

9o#e)er5 t(is Lce ruled in B6R Ruling No.C-/;0-0' dated Dune 2;5 200' t(at ]

\. . . if t(e transportation allo#ance . . . gi)ento your customer ser)ice representati)esand . . . to your coac(es are pro)ided forParlanceZs and ocati)eZs con)enience and$enet5 t(e said transportation allo#ance isnot su$ect to fringe $enets tax pursuant to<ection 2.//*+ of Re)enue Regulations no. /-%&5 as amended.

9o#e)er5 if t(e a$o)e-mentionedtransportation and representation allo#ancesare xed in amounts and are regularly

recei)ed $y t(e employees as part of t(eirmont(ly compensation income5 t(e sames(all not $e treated as taxa$le fringe $enets$ut t(e same s(all $e treated as allo#ances#(ic( s(all form part of t(eir taxa$lecompensation income su$ect to income taxand conse?uently to t(e #it((olding taxprescri$ed under <ection A% of t(e ax +odeof 1%%A.

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=oreo)er5 any amount paid specically5 eit(eras ad)ances or reim$ursements for tra)eling5representation and ot(er $ona de ordinaryand necessary expenses incurred orreasona$ly expected to $e incurred $y t(eemployee in t(e performance of (is duties are

not compensation su$ect to #it((olding5 if t(e follo#ing conditions are satised:

*i 6t is for ordinary and necessary tra)elingand representation or entertainmentexpenses paid or incurred $y t(e employee int(e pursuit of t(e trade5 $usiness orprofession4 and

*ii (e employee is re?uired toaccountli?uidate for t(e foregoing expensesin accordance #it( t(e specic re?uirements

of su$stantiation for eac( category of expenses pursuant to <ection /' of t(e +ode. (e excess of ad)ances made o)er actualexpenses s(all constitute taxa$le income if suc( amount is not returned to t(e employer.Reasona$le amounts #(ic( are pre-computedon a daily $asis and are paid to an employee#(ile (e is on an assignment or duty need not$e su$ect to t(e re?uirements of su$stantiation and to #it((olding *<ection2.A&.1**"*$ of Re)enue Regulations No. 2-%&5 as amended $y Re)enue Regulations No.

/-%&5 &-2000 and 10-2000

6n )ie# of t(e foregoing5 t(is Lce conrmsyour opinion t(at t(e transportation allo#ance$eing gi)en $y your su$sidiaries5 Parlance<ystems5 6nc. and ocati)e <ystems5 6nc. to itscustomer ser)ice representati)es are notcompensation su$ect to income tax andconse?uently5 to #it((olding tax on #ages inaccordance #it( Re)enue Regulations No. 2-%&5 as amended. =oreo)er5 since t(e

transportation allo#ance is pre-computed ona daily $asis and are paid to t(e employee#(ile on an assignment or duty5 t(e saidtransportation allo#ance is not su$ect to t(ere?uirements of su$stantiation and to#it((olding pursuant to Re)enue Regulations

No. 2-%&5 as amended.\

pplying t(e a$o)e ruling5 t(is Lce conrmsyour opinion t(at since t(e transportationallo#ance $eing gi)en to >G<6Zs employees isan ordinary and necessary expense paid orincurred $y t(e employees in t(e pursuit of t(e $usiness of t(e company5 t(e saidallo#ance is not considered compensation5(ence5 not su$ect to #it((olding tax.

(e said transportation allo#ance is not

su$ect to t(e re?uirements of su$stantiationand to #it((olding since it is pre-computed ona daily $asis and is paid to t(e employees#(ile on an assignment or duty pursuant toRe)enue Regulations No. 2-%&5 as amended.

=oreo)er5 transportation allo#ance is notsu$ect to t(e fringe $enets tax since it isre?uired $y t(e nature of t(e $usiness of >G<6and under t(e con)enience of employer rulepursuant to <ection // *+ of t(e ax +ode of 1%%A as implemented $y RR No. /-%&.

(is Lce (ad occasion to rule in B6R RulingNo. 02/-02 dated Dune 215 2002 t(at t(ea$o)e regulations are illustrati)e and non-exclusi)e in t(e enumeration of #(atconstitutes de minimis fringe $enets. (e+ommissioner (eld t(at alt(oug( t(e mealand food $enets granted #ere not intendedto $e used for o)ertime #or35 t(ey may still$e added in t(e a$o)e enumeration. 9o#e)er5in terms of de minimis t(res(old for regular

&




meal and food $enet5 t(e ceiling for $enetsof similar nature under RR No. &-2000 s(ould$e used as guidelines. <uc( $eing t(e case5meal and food $enets not exceeding 2;Q of t(e daily minimum #age may $e consideredde minimis meal $enet and t(erefore5 tax

exempt. (e excess o)er t(is amount s(all $econsidered \ot(er $enets\ as contemplatedunder <ection /2 *B *A *e *i) of t(e ax+ode of 1%%A. (e excess of t(e meal andfood allo#ance gi)en o)er t(e de minimisceiling s(all still $e exempt pro)ided t(at it5toget(er #it( t(e total amount of \ot(er$enets5\ s(all not exceed P(P/05000.

6n one case5 a call center pro)iding tec(nicalsupport ser)ice #it( 2' (ours operation dailyplanned to pro)ide its gra)eyard s(ift

employees P(P100.00 meal allo#ance fore)ery nig(tZs #or3. (is Lce (eld ]

\6n )ie# of t(e foregoing5 t(e P(P100.00 mealallo#ance gi)en to your gra)eyard s(iftemployees #(ic( is not intended to $e usedfor o)ertime #or3 may still $e added in t(eenumeration of de minimis fringe $enets. (e portion of t(e meal allo#ance notexceeding 2;Q of t(e daily minimum #agemay $e considered de minimis meal $enet5and t(erefore5 tax exempt. (e excess o)er

t(is amount s(all $e considered as \ot(er$enets\ as contemplated under <ec. /2*B*A*e*i) of t(e ax +ode of 1%%A. (e excess of t(e meal allo#ance gi)en o)er t(e de minimisceiling s(all still $e exempt pro)ided t(at it5toget(er #it( t(e total amount of ot(er$enets5 s(all not exceed P(P/05000 *B6RRuling No. C-2/&-0/ dated Duly 2/5 200/.\

ccordingly5 t(is Lce (olds t(at mealallo#ance $eing gi)en across all >G<6

staKoLcer le)els not exceeding 2;Q of t(eirrespecti)e daily minimum #age may $econsidered de minimis meal $enet pursuantto RR No. &-2000 and 10-2000 and t(erefore5tax exempt. (e excess o)er t(is amount s(all$e considered \ot(er $enets\ as

contemplated under <ection /2*B*A*e*i) of t(e ax +ode of 1%%A. (e excess of t(e mealallo#ance gi)en o)er t(e de minimis ceilings(all still $e exempt pro)ided t(at it5 toget(er#it( t(e total amount of ot(er $enets5 s(allnot exceed P(P/05000 #(en added to t(e1/t( mont( pay. 6f t(e employer pays moret(an t(e ceiling prescri$ed $y t(eRegulations5 t(e excess s(all $e taxa$le to t(eemployee recei)ing t(e $enets only if suc(excess is $eyond t(e P(P/05000 ceiling *citedin B6R Ruling No. 001-200A dated Danuary 205

200A. (e said meal allo#ance is not su$ectto fringe $enets tax since it is specicallyexempted from t(e application t(ereof pursuant to <ection //*+*'5 *; and *" of RR/-%& implementing <ection //*+ of t(e ax+ode. *B6R Ruling No. "1-%% dated =ay ;51%%%. Neit(er is it su$ect to su$stantiationre?uirement.

=o$ile llo#ance

s stated earlier5 cas( allo#ances gi)en to

employees as incenti)es are generallyconsidered compensation income su$ect toincome tax and #it((olding tax pursuant to<ection 2.A&.1 of RR No. 2-%&5 as amended.

9o#e)er5 in one case5 a company operating apo#er plant #as compelled to pro)ide (ousingfacility to ensure 2'-(our access to s3illed#or3ers as po#er failure and trou$le s(ootingmay $e re?uired at any time of t(e day. (isLce (as ruled in t(e said case t(at ]

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\. . . fringe $enets means any goods5 ser)iceor ot(er $enet furnis(ed or granted $y anemployer in cas( or in 3ind5 in addition to$asic salaries5 to an employee *except ran3and le employee suc( as (ousing. <ection

//*a of t(e ax +ode of 1%%A stipulates t(atfringe $enets #(ic( are Zre?uired $y t(enature of5 or necessary to t(e trade5 $usinessor profession of t(e employer5 or #(en t(efringe $enet is for t(e con)enience orad)antage of t(e employerZ are not su$ect tot(e fringe $enet tax. 6f t(e li)ing ?uarters arefurnis(ed to an employee for t(e con)enienceof t(e employer5 t(e )alue t(ereof need not$e included as part of compensation incomesu$ect to #it((olding. . . .xxx xxx xxx

. . . considering t(at it is a fringe $enet fort(e con)enience and ad)antage of t(eemployer5 it s(all not $e included as part of compensation income of t(e employeesu$ect to #it((olding neit(er #ill it $esu$ect to t(e fringe $enets tax under <ec.// of t(e ax +ode of 1%%A as implemented$y Re)enue Regulations No. /-%&.\ *B6R RulingNo. 0;;-%% dated pril 2/5 1%%%6n anot(er case5 a company gi)es a xedamount of outstation allo#ance for meals5$aggage ser)ices5 laundry expenses5 par3ing

fees5 toll fees5 telep(one fees and ot(erincidental expenses to employees #(o aresent to locations $eyond =etro =anila. (e+ommissioner (eld t(at ]

\. . . as a general rule5 <ection //* of t(e ax +ode of 1%%A imposes a nal #it((oldingtax of /2Q on t(e grossed-up monetary )alueof fringe $enet furnis(ed or granted to t(eemployee *except ran3 and le employees $y

t(e employer5 #(et(er an indi)idual orcorporation.

(is general rule is not5 (o#e)er5 #it(outexception. (e afore?uoted section sets fort(t#o scenarios #(erein no fringe $enets tax

#ill $e imposed5 i.e.5 *1 #(en t(e fringe$enet is re?uired $y t(e nature of ornecessary to t(e trade5 $usiness or professionof t(e employer4 or *2 #(en t(e fringe$enet is for t(e con)enience or ad)antage of t(e employer.xxx xxx xxx (e utstation llo#ance5 t(erefore5 is clearlyre?uired $y t(e nature of or necessary to t(etrade or $usiness of PG=+. ccordingly5 t(isLce opines and so (olds t(at t(e grant of t(e utstation llo#ance $y PG=+ to its

managerial and super)isory employees arenot su$ect to t(e fringe $enets taxprescri$ed in <ection //* of t(e said +ode.+onse?uently5 t(e utstation llo#ance5 not$eing part of t(e compensation income of t(eemployee5 is not su$ect to income tax andconse?uently to #it((olding tax.

By t(e same to3en5 t(e utstation llo#ance#(ic( may $e incurred or expected to $eincurred $y t(e aforesaid employee in t(eperformance of (is duties cannot $e

considered as part of compensation su$ect to#it((olding tax e)en if t(e employee fails toaccountli?uidate t(e same considering t(atsaid expense is pre-computed on a daily $asisand is paid to an employee #(ile (e is on anassignment or duty.<ection 2*"*$*ii of Re)enue Regulations No.&-2000 specically states t(at:

Z*ii(e employee is re?uired toaccountli?uidate for t(e foregoing expenses

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in accordance #it( t(e specic re?uirementsof su$stantiation for eac( category of expenses pursuant to <ec. /' of t(e +ode. (e excess of actual expenses o)er ad)ancesmade s(all constitute taxa$le income if suc(amount is not returned to t(e employer.

Reasona$le amounts of reim$ursementsad)ances for tra)eling andentertainment expenses #(ic( are pre-computed on a daily $asis and are paid to anemployee #(ile (e is on an assignment orduty need not $e su$ect to t(e re?uirementsof su$stantiation and to #it((olding.Z \*B6RRuling No. 01/-02 dated pril ;5 2002

6n )ie# of t(e foregoing and since yourepresented t(at t(e mo$ile p(one allo#anceis $eing granted to directors5 managers and

super)isors $ecause t(e nature of t(eir o$sre?uires t(em to $e on call 2' (ours a day#(ic( is necessary to t(e $usiness of >G<6and redounds to t(e con)enience and $enetof t(e company5 said fringe $enet s(all not$e included as part of compensation incomeof t(e concerned employees su$ect to#it((olding tax prescri$ed under <ection A%of t(e ax +ode of 1%%A neit(er #ill it $esu$ect to t(e fringe $enets tax under<ection // of t(e ax +ode of 1%%A5 asimplemented $y RR No. /-%&5 as amended.

Furt(er5 t(e mo$ile allo#ance is not su$ect tot(e re?uirement of su$stantiation.

B/R Ruling No. *A010O ;4etrobank Card Corporation<

6n reply t(ereto5 please $e informed t(at<ection 2.// *+ of Re)enue Regulations No./-%&5 as amended5 pro)ides ]

\*+ Fringe Benets Not <u$ect to FringeBenet ax. ] 6n general5 t(e fringe $enets

tax s(all not $e imposed on t(e follo#ingfringe $enets:xxx xxx xxx*; 6f t(e grant of fringe $enets to t(eemployee is re?uired $y t(e nature of5 ornecessary to t(e trade5 $usiness or profession

of t(e employer4 or*" 6f t(e grant of fringe $enets to t(eemployee is for t(e con)enience of t(eemployer.\

+orollarily5 <ection 2.A&.1 * *" *$ of Re)enue Regulations No. &-2000 pro)ides t(at]

\*" Fixed or )aria$le transportation5representation and ot(er allo#ances. ]xxx xxx xxx

*$ ny amount paid specically5 eit(er asad)ances or reim$ursements for tra)eling5representation and ot(er $ona de ordinaryand necessary expenses incurred orreasona$ly expected to $e incurred $y t(eemployee in t(e performance of (is duties arenot compensation su$ect to #it((olding5 if t(e follo#ing conditions are satised:*i 6t is paid for ordinary and necessarytra)eling and representation or entertainmentexpenses paid or incurred $y t(e employee int(e pursuit of t(e trade5 $usiness or

profession4 and*ii (e employee is re?uired toaccountli?uidate for t(e foregoing expensesin accordance #it( t(e specic re?uirementsof su$stantiation for eac( category of expenses pursuant to <ection /' of t(e +ode. (e excess of actual expenses o)er ad)ancesmade s(all constitute taxa$le income if suc(amount is not re?uired to t(e employer.Reasona$le amounts of reim$ursementsad)ances for tra)eling and

&#




entertainment expenses #(ic( are pre-computed on a daily $asis and are paid to anemployee #(ile (e is on an assignment orduty need not $e su$ect to t(e re?uirementsof su$stantiation and to #it((olding.\

6n stressing t(e rationale of t(e a$o)e-mentioned principles5 t(is Lce elucidated ont(e matter in B6R Ruling No. C/;0-0' dated Dune 2;5 200'5 as follo#s:

\ransportation allo#ance $eing gi)en $y yoursu$sidiaries5 Parlance <ystems5 6nc. andocati)e <ystems5 6nc. to its customer ser)icerepresentati)es are not compensation su$ectto income tax and conse?uently to#it((olding tax on #ages in accordance #it(Re)enue Regulations No. 2-%&5 as amended.

=oreo)er5 since t(e transportation allo#anceis pre-computed on a daily $asis and are paidto t(e employee #(ile on an assignment orduty5 t(e said transportation allo#ance is notsu$ect to t(e re?uirements of su$stantiationand to #it((olding pursuant to Re)enueRegulations No. 2-%&5 as amended.\

(e a$o)e-cited ruling #as later reiterated inB6R Ruling No. C-02/-0" dated Danuary 2A5200"5 #(ere it #as (eld t(at ]

\6f t(e utstation llo#ance is clearly re?uired$y t(e nature of or necessary to t(e trade or$usiness of t(e employer5 t(e grant of suc(utstation llo#ance is not su$ect to t(efringe $enets tax prescri$ed in <ection //*of t(e said +ode. +onse?uently5 t(eutstation llo#ance5 not $eing part of t(ecompensation income of t(e employee5 is notsu$ect to income tax and conse?uently to#it((olding tax. By t(e same to3en5 t(eutstation llo#ance #(ic( may $e incurred

or expected to $e incurred $y t(e aforesaidemployee in t(e performance of (is dutiescannot $e considered as part of compensationsu$ect to #it((olding tax e)en if t(eemployee fails to accountli?uidate t(e sameconsidering t(at said expense is pre-

computed on a daily $asis and is paid to anemployee #(ile (e is on an assignment orduty.\

6N 6>W F 9> FR>G6NG5 t(is Lce(ere$y conrms your opinion t(at t(e a$o)e-mentioned $enets #(ic( are for t(econ)enience of =++ and are re?uired $y t(enature of5 or necessary to t(e trade or$usiness of =++ are not su$ect to t(e fringe$enets tax pursuant to <ection 2.// *+ of Re)enue Regulations No. /-%&5 as amended.

=oreo)er5 since t(e said $enets are pre-computed on a daily $asis and are paid to t(eemployees5 #(ile t(ey are on assignment orduty5 t(ey are not su$ect to t(e re?uirementsof su$stantiation and t(erefore not su$ect toincome tax and to #it((olding tax.

x------------------------------------x

8. TA TREATMENT O+ 17TH MONTH PAK & OTHER BENE+ITS

National /nternal Re&enue Code S$;B<;%<;e<

e 17%- Mo$%- Pay a$d O%-e! Be$e%(. -Gross $enets recei)ed $y oLcials andemployees of pu$lic and pri)ate entities:Pro)ided5 (o#e)er5 (at t(e totalexclusion under t(is su$paragrap( s(allnot exceed (irty t(ousand pesos*P/05000 #(ic( s(all co)er:*i Benets recei)ed $y oLcials and

employees of t(e national and local

&$




go)ernment pursuant to Repu$lic ctNo. ""&"4

*ii Benets recei)ed $y employeespursuant to Presidential Cecree No.&;15 as amended $y =emorandumrder No. 2&5 dated ugust 1/5 1%&"4

*iii Benets recei)ed $y oLcials andemployees not co)ered $y Presidentialdecree No. &;15 as amended $y=emorandum rder No. 2&5 datedugust 1/5 1%&"4 and

*i)t(er $enets suc( as producti)ityincenti)es and +(ristmas $onus:Pro)ided5 furt(er5 (at t(e ceiling of (irty t(ousand pesos *P/05000 may$e increased t(roug( rules andregulations issued $y t(e <ecretary of Finance5 upon recommendation of t(e

+ommissioner5 after consideringamong ot(ers5 t(e eKect on t(e sameof t(e in[ation rate at t(e end of t(etaxa$le year.

PER+ORMANCE BONUS

B/R Ruling No. 0010% ;'L*T<

(is refers to your letter dated Duly 1'5 200"re?uesting for conrmation of your opiniont(at t(e performance $onus gi)en to t(e ran3

and le employees as #ell as to super)isoryemployees of P(ilippine ,ong Cistance elep(one +ompany *\P,C\ is a \deminimis\ $enet exempt from #it((olding taxciting B6R Ruling No. C-//"-200" as your$asis.

6n reply5 please $e informed t(at it is $asic instatutory construction t(at #(ere t(e la# isclear and unam$iguous5 t(ere is no room for

interpretation. 9ence5 t(e duty of t(is Lce ismerely to apply t(e la#.

nder <ection /2 *B *A *e *i) of t(e ax+ode of 1%%A5 \ot(er $enets\ include all$enets ot(er t(an t(e 1/t( mont( pay5 suc(

as5 producti)ity incenti)es and t(e annual+(ristmas $onus gi)en $y pri)ate oLces5 1't(mont( pay5 mid-year producti)ity incenti)e$onus5 gifts in cas( or in 3ind and ot(ersimilar $enets and refer to t(ose $enetsrecei)ed $y an oLcial or employee for one *1calendar year5 t(e total amount of #(ic(including t(e 1/t( mont( pay does notexceed P/05000.00.

<ection 2 of Re). Regs. No. &-20005 asamended5 claries t(at \ot(er $enets\ and

\de minimis\ $enets are not t(e same. Forpurposes of determining t(e P/05000.00ceiling in \ot(er $enets5\ t(e t#o are treateddiKerently in t(at t(e amount of \de minimis\$enets conforming to t(e limits prescri$edunder Re)enue Regulations *Re). Regs. No. &-2000 s(all not $e considered in determiningt(e P/05000.00 ceiling of \ot(er $enets\pro)ided under <ection /2 *B *A *e of t(e+ode. (e regulations does not pro)ide for aceiling #it( regard to \de minimis\ $enets.9o#e)er5 it pro)ides for a limit in t(e amount

of eac( \de minimis\ $enet suc( t(at if t(eemployer gi)es more t(an t(e limitprescri$ed5 t(e excess of t(e P(P/05000ceilinglimit s(all $e taxa$le to t(e employeerecei)ing t(e $enets. Bot( \ot(er $enets\and \de minimis\ $enets do not form part of t(e employeesZ taxa$le compensation incomeand are5 t(erefore5 not su$ect to #it((oldingtax on #ages under <ection A% in relation to<ection 2' * $ot( of t(e ax +ode of 1%%A.

&%




6n )ie# of t(e foregoing5 t(e performance$onus gi)en $y P,C to its ran3 and leemployees as #ell as to super)isoryemployees can $e e?uated to a producti)ityincenti)e $onus #(ic( may $e considered asfalling #it(in t(e contemplation of \ot(er

$enets\ pro)ided for under <ection /2 *B *A*e *i) of t(e ax +ode of 1%%A5 and t(erefore5need not form part of t(e employeesZ taxa$lecompensation income su$ect to #it((oldingtax on #ages under <ection A% in relation to<ection 2' * $ot( of t(e ax +ode of 1%%A5pro)ided5 (o#e)er5 t(at suc( \ot(er $enets5\inclusi)e of t(e a$o)e allo#ances$enets5s(all not5 in t(e aggregate5 exceedP/05000.00 #(en added to t(e 1/t( mont(pay.

ny amount in excess of t(e P/05000.00ceiling s(all $e taxa$le to t(e employeerecei)ing t(e $enets. Pro)ided5 furt(er5 t(atany amount gi)en $y t(e employer as$enets to its employees5 #(et(er classiedas \de minimis\ $enets or fringe $enets5s(all constitute as deducti$le expense uponsuc( employer pursuant to <ection 2.A&.1 **/ of Re). Regs. No. &-20005 as amended.

ccordingly5 t(e performance $onus is notsu$ect to t(e fringe $enets tax also since it

addresses P,CZs concern in encouraginggood performance as #ell as promotingcontentment and eLciency among itsemployees5 #(ic( in eKect redounds to t(econ)enience of t(e employer.

Finally5 consistent #it( t(e aim of t(is Bureauto (armoniHe con[icting rulings5 B6R RulingNo. C-//"-200" dated =ay 225 200" #(ic(ruled ]

\6N 6>W F 9> FR>G6NG5 t(is Lce(olds t(at t(e annual cas( a#ard to $e gi)ento your ran3 and le employees asPerformance 6ncenti)e #ard ranging fromPA5;00.00 to P1;5000.00 s(all $e consideredas de minimis $enets and t(erefore not

su$ect to income tax and conse?uently to#it((olding tax.xxx xxx xxx\is (ere$y re)o3ed insofar as it (eld t(atperformance incenti)e a#ard is considered as\de minimis\ $enet. ll B6R rulingsinconsistent (ere#it( are deemed repealed5re)o3ed or modied.

B/R Ruling No. *A$@$0 ;Lu#thansa Technical<

(is refers to your letter dated <eptem$er 125200; re?uesting for conrmation of youropinion t(at t(e performance $onus *\$onus\gi)en $y ,uft(ansa ec(nical rainingP(ilippines5 6nc. *,P to its employees5except its General =anager5 is not su$ect totax *fringe $enet tax for t(ose (oldingmanagerial position and compensation tax fort(ose in t(e ran3 and le position5 as t(is isgranted $y ,P for its con)enience and$enet.

6n reply5 please $e informed t(at under<ection /2*B*A*e*i) of t(e ax +ode of 1%%A5 \ot(er $enets\ include all $enetsot(er t(an t(e 1/t( mont( pay5 suc( as5 t(eannual +(ristmas $onus gi)en $y pri)ateoLces5 1't( mont( pay5 mid-year producti)ityincenti)e $onus5 gifts in cas( or in 3ind andot(er similar $enets and refer to t(ose$enets recei)ed $y an oLcial or employeefor one *1 calendar year5 t(e total amount of

&&




#(ic( including t(e 1/t( mont( pay does notexceed P/05000.00.

(e performance $onus to $e gi)en $y ,P toits employees can $e e?uated to aproducti)ity incenti)e $onus #(ic( may $e

considered as falling #it(in t(e contemplationof \ot(er $enets\ pro)ided for under <ection/2*B*A*e*i) of t(e ax +ode of 1%%A5 andt(erefore5 need not form part of t(eemployeesZ taxa$le compensation incomesu$ect to #it((olding tax on #ages under<ection A% in relation to <ection 2'* $ot( of t(e ax +ode of 1%%A5 pro)ided5 (o#e)er5 t(atsuc( \ot(er $enets5\ inclusi)e of t(e a$o)eallo#ances$enets5 s(all not5 in t(eaggregate5 exceed P/05000.00 #(en added tot(e 1/t( mont( pay.

ccordingly5 t(e performance $onus is notsu$ect to t(e fringe $enets tax also since itaddresses ,PZs concern in encouraging itsemployeesinstructors not to lea)e t(ecompany and ac(ie)e t(e annual companytarget5 as appro)ed $y t(e 9ead Lce5 #(ic(in eKect redounds to t(e con)enience of t(eemployer.

(e amount of \de minimis\ $enetsconforming to t(e ceiling prescri$ed s(all not

$e considered in determining t(e P/05000.00ceiling of \ot(er $enets\ pro)ided under<ection /2*B*A*e of t(e +ode. 9o#e)er5 if t(e employer pays more t(an t(e ceilingprescri$ed $y t(e Regulations5 t(e excesss(all $e taxa$le to t(e employee recei)ing t(e$enets only if suc( excess is $eyond t(eP/05000.00 ceiling. Pro)ided5 furt(er5 t(at anyamount gi)en $y t(e employer as $enets toits employees5 #(et(er classied as \deminimis\ $enets or fringe $enets5 s(all

constitute as deducti$le expense upon suc(employer pursuant to <ection 2.A&.1**/ of Re). Regs. No. &-20005 as amended.

<ection 2 of Re). Regs. No. &-20005 asamended5 claries t(at \de minimis\ $enets

and \ot(er $enets\ are not t(e same. Forpurposes of determining t(e P/05000.00ceiling in \ot(er $enets5\ t(e t#o are treateddiKerently in t(at \de minimis\ $enets arenot considered in computing t(e P/05000.00ceiling in \ot(er $enets.\ (e regulations didnot pro)ide for a ceiling in \de minimis\$enets. 9o#e)er5 it pro)ided for a limit int(e amount of eac( \de minimis\ $enet *e.g.5rice su$sidy s(ould not exceed P15000.00 permont(. Bot( \ot(er $enets\ and \deminimis\ $enets do not form part of t(e

employeesZ taxa$le compensation income andare5 t(erefore5 not su$ect to #it((olding taxon #ages under <ection A% in relation to<ection 2'* $ot( of t(e ax +ode of 1%%A.

B/R Ruling No. *A$O00 ;*,+*<

(is refers to your undated letter re?uestingfor a ruling on #(et(er or not yourperformance $onus and ot(er +ollecti)eNegotiation greement *+N $enets aresu$ect #it((olding tax.

6n reply5 please $e informed t(at t(e follo#ingrules s(all generally apply in considering t(etax conse?uences of certain $enets gi)en $yemployers to t(eir employees5 #(et(er ran3-and-le5 super)isory or managerial:

1. Facilities or pri)ileges t(at are categoriHedas de minimis $enets under pertinentrules and regulations s(all not $e includedas items of gross income for income tax

100




purposes. (ey s(all not also $e includedin t(e computation of t(e P/05000t(res(old for a determination of t(e itemsof income t(at are to $e excluded fromincome under <ection /2*B*A*e of t(e ax +ode of 1%%A.

2. +orollary to t(is5 de minimis $enets areneit(er to income tax on compensationnor to t(e fringe $enets tax. Furt(ermore5no #it((olding tax t(ereon s(all $eimposed in )ie# of t(eir exclusion andexemption from tax.

/. (e gross $enets granted to ran3-and-le5 super)isory or managerial employeesof entities5 to t(e extent of t(e t(res(oldof P/05000.00 mandated $y <ection /2*B

*A*e of t(e ax +ode of 1%%A5 s(all not $eincluded as items of gross income ands(all5 t(erefore5 $e exempt from incometaxation. ccordingly5 suc( $enets gi)enin excess of t(e t(res(old amount s(all $etaxa$le to t(e recipient employee.

'. (e \ot(er $enets\ referred to in <ection/2*B*A*e*i) of t(e ax +ode of 1%%Ainclude all $enets5 ot(er t(an t(e 1/t(mont( pay5 suc( as5 t(e annual +(ristmas$onus gi)en $y pri)ate entities5 1't(

mont( pay5 mid-year producti)ityincenti)e $onus5 gifts in cas( or in 3indand ot(er similar $enets and refer tot(ose $enets recei)ed $y an oLcial oremployee for one *1 calendar year5 t(etotal amount of #(ic( including t(e 1/t(mont( pay does not exceed P/05000.00

;. Re)enue Regulations No. /-%&5 asamended $y Re)enue Regulations No. &-2000 and 10-2000 are illustrati)e and non-

exclusi)e in t(e enumeration of #(atconstitute de minimis fringe $enets.ccordingly5 #e (a)e ruled t(at t(e mealand food $enets granted5 alt(oug( notintended to $e used for o)ertime #or35may still $e added in t(e enumeration of

de minimis fringe $enets. 9o#e)er5 interms of t(e de minimis t(res(old forregular meal and food $enet5 t(e ceilingfor $enets of similar nature underRe)enue Regulations No. &-2000 s(ould $eused as guidelines. <uc( $eing t(e case5meal and food $enets not exceeding 2;Qof t(e daily minimum #age may $econsidered de minimis meal $enet5 andt(erefore5 tax exempt.

(e amount of \de minimis\ $enets

conforming to t(e ceiling prescri$ed s(allnot $e considered in determining t(eP/05000.00 ceiling of \ot(er $enets\pro)ided under <ection /2*B*A*e of t(e+ode. 9o#e)er5 if t(e employer pays moret(an t(e ceiling prescri$ed $y t(eRegulations5 t(e excess s(all $e taxa$le tot(e employee recei)ing t(e $enets only if suc( excess is $eyond t(e P/05000.00ceiling. Pro)ided5 furt(er5 t(at any amountgi)en $y t(e employer as $enets to itsemployees5 #(et(er classied as \de

minimis\ $enets or fringe $enets5 s(allconstitute as deducti$le expense uponsuc( employer pursuant to <ection2.A&.1**/ of Re). Regs. No. &-20005 asamended.

ccordingly5 t(e excess of t(e meal andfood allo#ance gi)en o)er t(e de minimisceiling s(all still $e exempt pro)ided t(atit5 toget(er #it( t(e total amount of ot(er

101




$enets5 s(all not exceed P(p/05000 *B6RRuling No. 2/-2002 dated Dune 215 2002.

". 6n 3eeping #it( t(e spirit of t(e rules andregulations on de minimis $enets5 #e(a)e ruled t(at t(ere can $e no

aggregation of t(e )alues set for eac(item of $enet stated in Re)enueRegulations Nos. 2-%& and /-%&5 asamended $y Re)enue Regulations Nos. &-2000 and 10-2000. (e intent of t(eRegulations is to treat eac( item of deminimis $enet independently of eac(ot(er5 and #e (a)e to gi)e life to t(atintent. (us5 t(e Regulations separatelypro)ide maximum )alues for riceallo#ance and for meal allo#ance.ccordingly5 t(ere can $e no aggregation

of de minimis )alues for rice and meal andfood $enets *B6R Ruling No. 2/-2002dated Dune 215 2002.

6n addition to t(e foregoing5 it is t(e rule t(att(e fringe $enets tax is a nal tax on t(eemployee5 ot(er t(an a ran3-and-leemployee5 t(at s(all $e #it((eld and paid $yt(e employer on a calendar ?uarterly $asis aspro)ided under <ection ;A* of t(e ax +odeof 1%%A. Being a nal tax5 (o#e)er5 t(eamount of fringe $enets gi)en s(all not $e

reported as income in t(e concernedemployeeZs annual tax return consolidation.

<ection 2 of Re). Regs. No. &-20005 asamended5 claries t(at \de minimis\ $enetsand \ot(er $enets\ are not t(e same. Forpurposes of determining t(e P/05000.00ceiling in \ot(er $enets5\ t(e t#o are treateddiKerently in t(at \de minimis\ $enets are noconsidered in computing t(e P/05000.00ceiling in \ot(er $enets.\ (e regulations did

not pro)ide for a ceiling in \de minimis\$enets. 9o#e)er5 it pro)ided for a limit int(e amount of eac( \de minimis\ $enet *e.g.5rice su$sidy s(ould not exceed P15000.00 permont(. Bot( \ot(er $enets\ and \deminimis\ $enets do not form part of t(e

employeesZ taxa$le compensation income andare5 t(erefore5 not su$ect to #it((olding taxon #ages under <ection A% in relation to<ection 2'* $ot( of t(e ax +ode of 1%%A.

(e term \de minimis\ $enets #(ic( areexempt from t(e fringe $enets tax s(all5 ingeneral5 $e limited to facilities or pri)ilegesfurnis(ed or oKered $y an employer to (isemployees t(at are of relati)ely small )alueand are oKered or furnis(ed $y t(e employermerely as a means of promoting t(e (ealt(5

good#ill5 contentment5 or eLciency of (isemployees. (e follo#ing s(all $e consideredas \de minimis\ $enets not su$ect toincome tax as #ell as #it((olding tax oncompensation income of $ot( managerial andran3 and le employees:

1. =onetiHed unused )acation lea)e creditsof employees not exceeding ten *10 daysduring t(e year and t(e monetiHed )alueof lea)e credits paid to go)ernmentoLcials and employees4

2. =edical cas( allo#ance to dependents of employees not exceeding PA;0.00 peremployee per semester or P12; permont(4

/. Rice su$sidy of P15000.00 or one *1 sac3of ;0-3g. rice per mont( amounting to notmore t(an P15000.004

'. niform and clot(ing allo#ance notexceeding P/5000.00 per annum4

;. ctual yearly medical $enets notexceeding P105000.00 per annum4

102




". ,aundry allo#ance not exceeding P/00.00per mont(4

A. >mployees ac(ie)ement a#ards5 e.g. forlengt( of ser)ice or safety ac(ie)ement5#(ic( must $e in t(e form of a tangi$lepersonal property ot(er t(an cas( or gift

certicate5 #it( an annual monetary )aluenot exceeding P105000.00 recei)ed $y t(eemployee under an esta$lis(ed #rittenplan #(ic( does not discriminate in fa)orof (ig(ly paid employees4 Ca+69

&. Gifts gi)en during +(ristmas and maoranni)ersary cele$rations not exceedingP;5000.00 per employee per annum4

%. Flo#ers5 fruits5 $oo3s or similar itemsgi)en to employees under specialcircumstances e.g. on account if illness5marriage5 $irt( of a $a$y5 etc.5 and

10.Caily meal allo#ance for o)ertime #or3not exceeding t#enty-)e percent *2;Qof t(e $asic minimum #age.

(e performance $onus gi)en to C<WCemployees can $e e?uated to a producti)ityincenti)e $onus #(ic( may $e considered asfalling #it(in t(e contemplation of \ot(er$enets\ pro)ided for under <ection /2*B*A*e*i) of t(e ax +ode of 1%%A5 and t(erefore5need not form part of t(e employeesZ taxa$lecompensation income su$ect to #it((olding

tax on #ages under <ection A% in relation to<ection 2'* $ot( of t(e ax +ode of 1%%A5pro)ided5 (o#e)er5 t(at suc( \ot(er $enets5\inclusi)e of t(e a$o)e allo#ances$enets5s(all not5 in t(e aggregate5 exceedP/05000.00 #(en added to t(e 1/t( mont(pay.

ccordingly5 t(e performance $onus is notsu$ect to t(e fringe $enets tax also if itredounds to t(e con)enience of t(e employer.

6t appears t(at you #ere paid \ot(er $enets\in t(e amount of P(P//5%A1 #(ic( is P(P/5%A1o)er and a$o)e t(e t(res(old.

6n )ie# of t(e foregoing5 t(is Lce nds t(att(e amount in excess of P(P/05000 or

P(P/5%A1 #as correctly su$ected to#it((olding tax on compensation.

B/R Ruling No. *A0$0@ ;Lu#thansa Technik<

(is refers to your letter dated <eptem$er %5200' re?uesting for a conrmation of youropinion t(at t(e performance $onus *$onusgi)en $y ,uft(ansa ec(ni3 P(ilippines5 6nc.*,P to its employees5 except t(ose (oldingt(e position of ice President5 <enior icePresident and President5 is not su$ect to tax.

6n reply5 please $e informed t(at under<ection /2*$*A*e*i) of t(e ax +ode of 1%%A5 \ot(er $enets\ include all $enetsot(er t(an t(e 1/t( mont( pay5 suc( as5 t(eannual +(ristmas $onus gi)en $y pri)ateoLces5 1't( mont( pay5 mid-year producti)ityincenti)es $onus5 gifts in cas( or in 3ind andot(er similar $enets and refer to t(ose$enets recei)ed $y an oLcial or employeefor one *1 calendar year5 t(e total amount of #(ic( including t(e 1/t( mont( pay does not

exceed P/05000.00.

(e performance $onus to $e gi)en $y ,P toits employees can $e e?uated to aproducti)ity incenti)e $onus #(ic( may $econsidered as falling #it(in t(e contemplationof \ot(er $enets\ pro)ided for under <ection/2*B*A*e*i) of t(e ax +ode of 1%%A5 andt(erefore5 need not form part of t(eemployeesZ taxa$le compensation incomesu$ect to #it((olding tax on #ages under

10


< i A% i l i < i 2'* $ ( f $ ,P d i



<ection A% in relation to <ection 2'* $ot( of t(e ax +ode of 1%%A5 pro)ided5 (o#e)er5 t(atsuc( \ot(er $enets5\ inclusi)e of t(e a$o)eallo#ances$enets5 s(all not5 in t(eaggregate5 exceed P/05000.00 #(en added tot(e 1/t( mont( pay.

=oreo)er5 <ection //*+ of t(e ax +ode of 1%%A as implemented $y <ection 2.//*+ of Re)enue Regulations *Re). Regs. No. /-%&5 asamended $y Re). Regs. No. &-2000 and 10-20005 pro)ides5 )iH:

\*+ Fringe Benets Not <u$ect to FringeBenets ax ] (e follo#ing $enets are nottaxa$le under t(is <ection:*1 Fringe $enets #(ic( are aut(oriHed andexempted from income tax under t(e +ode or

under any special la#4*2 +ontri$utions of t(e employer for t(e$enet of t(e employee to retirement5insurance and (ospitaliHation $enet plans4*/ Benets gi)en to t(e ran3 and le5#(et(er granted under a collecti)e $argainingagreement or not4*' Ce =inimis $enets as dened in t(eseRegulations4*; 6f t(e grant of fringe $enets to t(eemployee is re?uired $y t(e nature of5 ornecessary to t(e trade5 $usiness or profession

of t(e employer4 or*" 6f t(e grant of t(e fringe $enet is for t(econ)enience of t(e employer.\ *>mp(asissupplied.

ccordingly5 t(e performance $onus is notsu$ect to t(e fringe $enets tax also since itaddresses t(e employerZs concern inac(ie)ing certain targets and a)oiding t(epayment of penalties arising from delays int(e deli)ery of its ser)ices under t(e ser)ice

contract agreement $et#een ,P and itscustomer5 #(ic( in eKect redounds to t(econ)enience of t(e employer.

(e amount of \de minimis\ $enetsconforming to t(e ceiling prescri$ed s(all not

$e considered in determining t(e P/05000.00ceiling of \ot(er $enets\ pro)ided under<ection /2*B*A*e of t(e +ode. 9o#e)er5 if t(e employer pays more t(an t(e ceilingprescri$ed $y t(e Regulations5 t(e excesss(all $e taxa$le to t(e employee recei)ing t(e$enets only if suc( excess is $eyond t(eP/05000.00 ceiling. Pro)ided5 furt(er5 t(at anyamount gi)en $y t(e employer as $enets toits employees5 #(et(er classied as \deminimis\ $enets or fringe $enets5 s(allconstitute as deducti$le expense upon suc(

employer pursuant to <ection 2.A&.1**/ of Re). Regs. No. &-20005 as amended.

<ection 2 of Re). Regs. No. &-20005 asamended5 claries t(at \de minimis\ $enetsand \ot(er $enets\ are not t(e same. Forpurposes of determining t(e P/05000.00ceiling in \ot(er $enets5\ t(e t#o are treateddiKerently in t(at \de minimis\ $enets arenot considered in computing P/05000.00ceiling in \ot(er $enets.\ (e regulations didnot pro)ide for a ceiling in \de minimis\

$enets. 9o#e)er5 it pro)ided for a limit int(e amount of eac( \de minimis\ $enet *e.g.5rice su$sidy s(ould not exceed P15000.00 permont(. Bot( \ot(er $enets\ and \deminimis\ $enets do not form part of t(eemployeesZ taxa$le compensation income andare5 t(erefore5 not su$ect to #it((olding taxon #ages under <ection A% in relation to<ection 2'* $ot( of t(e ax +ode of 1%%A.

x------------------------------------x

10!


id i l di $ t t li it d t f



9. TA TREATMENT O+ STOC4 OPTION PLANS & OTHERSTOC4 INCENTIE PLANS

B/R Ruling No. 000% ;,an 4iguel Corporation<

(is refers to your letter dated <eptem$er 1'5200" re?uesting conrmation of your opinionon t(e tax conse?uences arising from t(e>mployees <toc3 Purc(ase Plan *><PPgranted $y <an =iguel +orporation *<=+ tot(e employees of t(e <an =iguel Group of +ompanies *<=G. <=G consists of <=+ andits domestic su$sidiaries.

6n )ie# of t(e foregoing5 it is your opinion t(att(e su$scription to t(e <=+ s(ares $y t(e<=G employees participating in t(e ><PP at a

price 1;Q less t(an t(e price t(ereof ?uotedin t(e stoc3 exc(ange does not gi)e rise yetto a taxa$le e)ent at t(e time of su$scription$ecause t(e said 1;Q diKerence is areduction of t(e cost of t(eir su$scriptions tot(e <=+ s(ares5 t(erefore5 it is not yet arealiHed income. (e taxa$le e)ent #ill arise#(en t(e ><PP participants sell t(e <=+s(ares and collect t(e proceeds t(ereof. (eeconomic andor nancial $enet of t(e 1;Qprice diKerence is actually realiHed at t(e timeof sale of t(e <=+ s(ares $y t(e ><PP

participants. (e gain t(at t(e ><PPparticipants #ill realiHe is t(e excess of t(eselling price o)er t(e su$scription costs5#(ic( is less $y 1;Q t(an t(e price at #(ic(t(e <=+ s(ares #ere ?uoted at t(e time of su$scription.

6n reply5 please $e informed t(at under<ection /2 * of t(e 1%%A ax +ode5 asamended5 gross income includescompensation for ser)ices in #(ate)er form

paid5 including5 $ut not limited to fees5salaries5 #ages5 commissions and similaritems. (e term \compensation\ as denedunder <ec. 2.A&.1 of Re)enue Regulations*\RR\ No. 2-%&5 as amended5 means allremuneration for ser)ices performed $y an

employee for (is employer under anemployer-employee relations(ip5 unlessspecically excluded under <ection /2 *B>xclusions from Gross 6ncomeS of t(e ax+ode. 6t is pro)ided furt(er under t(e sameregulations t(at t(e name $y #(ic(remuneration for ser)ices is designated isimmaterial. (us5 salaries5 #ages5emoluments and (onoraria5 $onuses5allo#ances *e.g.5 transportation5representation5 entertainment and t(e li3e5fees including directorsZ fees5 if t(e director is

at t(e same time an employee of t(eemployercorporation5 taxa$le $onuses andfringe $enets *except t(ose #(ic( aresu$ect to t(e FB under <ection // of t(e ax+ode5 taxa$le pensions5 and retirement pay5and ot(er income of a similar natureconstitute compensation income.

6n t(e case at (and5 t(e 1;Q reduction onpremium relati)e to t(e su$scriptions of t(e<=G employees participating in t(e ><PPcould not $e considered as income forming

part of t(eir compensation in accordance #it(<ection /2 * of t(e 1%%A ax +ode5 asamended. 6t is noted t(at <=+Zs maino$ecti)es in conceptualiHing t(e ><PP #ere togenerate additional capital for t(e companyt(roug( t(e additional su$scription and tomoti)ate t(e employees to#ard greaterproducti)ity5 loyalty and concern for t(e+ompanyZs #ell-$eing $y allo#ing t(e <=Gemployees to participate directly in t(egro#t( of t(e company. =oreo)er5 t(e

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ti i ti i t( ><PP i it( t ti f 3 t l t Gl $ t $li ( d i 200/



participation in t(e ><PP is neit(er automaticnor compulsory on t(e part of t(e <=Gemployees5 t(us5 t(e same could $eappropriately c(aracteriHed as an in)estmentportfolio created for t(e $enet of <=+ andfor t(e participating <=G employees only. By

t(at c(aracteriHation5 said reduction onpremium could not $e treated as an additionalcompensation granted to t(e <=G employeesas t(e same negates t(e )ery nature of acompensation as dened in Re)enueRegulations No. 2-%&. (e reduction onpremium is not gi)en as a remuneration forser)ices performed $y t(e <=G employeesunder t(e employer-employee relations(ip5rat(er it is gi)en $ased on a mutualcontractual relations(ip arising from t(esu$scription $y t(e <=G employees to t(e

aut(oriHed capital stoc3 of <=+.

6n t(e e)ent5 (o#e)er5 t(at t(e participating<=G employees sell t(e <=+ s(ares5 t(e gain5if any5 deri)ed from t(e exercise of t(e stoc3options granted under t(e ><PP is su$ect tocapital gains tax. (e gain t(at t(e ><PPparticipants #ill realiHe is t(e excess of t(eselling price o)er t(e su$scription costs5#(ic( is less $y 1;Q t(an t(e price at #(ic(t(e <=+ s(ares #ere ?uoted at t(e time of su$scription.

B/R Ruling No. *A$@@0@ ;6lobe Telecom<

(is refers to your letter dated pril 115 200;stating t(at Glo$e elecom5 6nc. *Glo$e is acorporation organiHed and existing under t(ela#s of t(e P(ilippines4 t(at Glo$eZs commons(ares are listed and traded at t(e P(ilippine<toc3 >xc(ange *P<>4 t(at as an incenti)e toits executi)es5 to encourage loyalty andcontinued tenure and as a retention strategy

for 3ey talents5 Glo$e esta$lis(ed in 200/ an>xecuti)e <toc3 ption Plan *><P under#(ic( selected senior personnel of Glo$e*comprising of managers5 directors and (eadsof t(e corporate di)isions and groups #eregranted an option to su$scri$e to a xed

num$er of Glo$e common s(ares at anexercise price determined at t(e price at#(ic( t(e s(ares #ere traded at t(e time of t(e grant of t(e option *t(e ption GrantCate4 t(at ><P pro)ides for a t(ree yearaccrual or )esting period4 t(at no option may$e exercised prior to t(e lapse of t(e secondanni)ersary of t(e ption Grant Cate4 t(att(ereafter one-(alf *12 of t(e stoc3 option$ecomes exercisa$le #it( t(e ot(er (alf $ecoming exercisa$le upon t(e lapse of t(et(ird anni)ersary4 t(at t(e option grantee

may exercise in #(ole or in part t(e optiont(at (as )ested at any time prior to t(e lapseof t(e tent( anni)ersary of t(e ption GrantCate except t(at in cases of resignation5termination ot(er t(an for cause5 orretirement5 t(e option grantee may exerciseany )ested option on or $efore t(e eKecti)edate of t(e resignation5 or #it(in ninety *%0days from date of termination5 or #it(in t(ree*/ years from date of retirement5 as t(e casemay $e and t(at in case of termination forcause5 all unexercised options s(all $e

forfeited.

Based on t(e foregoing representations5 youno# re?uest conrmation of your opinion t(at]

1. (e diKerence $et#een t(e exercise priceand t(e mar3et )alue of t(e Glo$e commons(ares at t(e time of exercise constitutestaxa$le fringe $enets as dened under<ection //*B of t(e ax +ode of 1%%A4

10#




t(e employee *except ran3 and t(e conduct of t(e trade $usiness or exercise of a



t(e employee *except ran3 and t(eemployees as dened (erein $y t(eemployer5 #(et(er an indi)idual or acorporation *unless t(e fringe $enet isre?uired $y t(e nature of5 or necessary to t(etrade5 $usiness or profession of t(e employer5

or #(en t(e fringe $enet is or t(econ)enience or ad)antage of t(e employer. (e tax (erein imposed is paya$le $y t(eemployer #(ic( tax s(all $e paid in t(e samemanner as pro)ided for under <ection ;A* of t(e said +ode. (e grossed-up monetary)alue of t(e fringe $enet s(all $e determined$y di)iding t(e actual monetary )alue of t(efringe $enet $y sixty-six percent *""QeKecti)e Danuary 15 1%%&4 sixty-se)en percent*"AQ eKecti)e Danuary 15 1%%%4 and sixty-eig(t percent *"&Q eKecti)e Danuary 15 2000

and t(ereafter. . . \

6t is clear from t(e a$o)e-?uoted pro)ision5t(at t(e employer5 Glo$e5 is lia$le to pay anal tax of /2Q $ased on t(e grossed-up)alue of t(e $enet granted5 #(ic( representst(e actual monetary )alue of t(e aforesaid$enet e?ui)alent to t(e diKerence $et#eent(e exercise price and t(e mar3et )alue of t(es(ares at t(e time of exercise. ccordingly5t(e /2Q tax is paya$le upon t(e exercise of t(e option #(ic( is t(e time t(at any $enet

from t(e option is actually realiHed.

/. <ection /'**1 of t(e ax +ode of 1%%Apro)ides t(at ]

\*a 6n General. ] (ere s(all $e allo#edas deduction from gross income all t(eordinary and necessary expenses paid orincurred during t(e taxa$le year in carryingon or #(ic( are directly attri$uta$le to5 t(ede)elopment5 management5 operation andor

conduct of t(e trade5 $usiness or exercise of aprofession5 including:

*i reasona$le allo#ance for salaries5#ages5 and ot(er forms of compensation frompersonal ser)ices actually rendered5 including

t(e grossed-up monetary )alue of fringe$enet furnis(ed or granted $y t(e employerto t(e employee: Pro)ided5 (at t(e nal taximposed under <ection // (ereof (as $eenpaid.xxx xxx xxx\

(e follo#ing are t(e re?uisites fordeducti$ility of $usiness expenses from grossincome:*1 (e expense must $e ordinary andnecessary4

*2 6t must $e paid or incurred during t(etaxa$le year4*/ 6t may $e paid or incurred in carrying ont(e trade or $usiness4*' 6t must $e supported $y receipts5 )ouc(ersor documents. *see _amora )s. +ollector5 ,-1;2&05 =ay /15 1%;/

For t(is purpose5 it is clear t(at t(e deductions(all $e made in t(e year #(en t(e relatedexpense is incurred #(ic( in t(is case at t(etime of t(e exercise of t(e option #(en t(e

senior personnel realiHes t(e $enet as Glo$eeKecti)ely foregoes t(e diKerence $et#eent(e mar3et price and exercise price of t(es(ares.

<uc( $eing t(e case5 Glo$e can claim asdeduction from gross income t(e grossed-upmonetary )alue of t(e $enet t(at isfurnis(ed to its senior personnel under t(e><P5 or an amount e?ui)alent to t(e sum of *i t(e diKerence $et#een t(e exercise price

10%




Wit((olding on Wages of t(e ax +ode as from all sources #it(in and #it(out t(e



Wit((olding on Wages5 of t(e ax +ode5 asamended. *B6R Ruling No. 1/;-%A datedCecem$er 115 1%%A

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. SPECIAL TA TREATMENT O+ THE MINIMUM ?AGE

National /nternal Re&enue Code S$ ;66< 9 ;KK<;amended by RA @0D<

*GG (e term Zstatutory minimum #ageZ s(allrefer to t(e rate xed $y t(e Regional ripartite Wage and Producti)ity Board5as dened $y t(e Bureau of ,a$or and>mployment <tatistics *B,>< of t(eCepartment of ,a$or and >mployment*C,>.

*99 (e term Zminimum #age earnerZ s(allrefer to a #or3er in t(e pri)ate sectorpaid t(e statutory minimum #age5 or toan employee in t(e pu$lic sector #it(compensation income of not more t(ant(e statutory minimum #age in t(e non-agricultural sector #(ere (es(e isassigned.

National /nternal Re&enue Code S$D;A<;last paragraph inserted by RA @0D<

ARa%e( o, I$co)e Ta o$ I$d#d'alC%e$ a$d I$d#d'al Re(de$% Ale$o, %-e P-l""$e(.

*1 n income tax is (ere$y imposed:*a n t(e taxa$le income dened in

<ection /1 of t(is +ode5 ot(er t(anincome su$ect to tax under<u$sections *B5 *+ and *C of t(is<ection5 deri)ed for eac( taxa$le year

from all sources #it(in and #it(out t(eP(ilippines $e e)ery indi)idual citiHenof t(e P(ilippines residing t(erein4

*$ n t(e taxa$le income dened in<ection /1 of t(is +ode5 ot(er t(anincome su$ect to tax under<u$sections *B5 *+ and *C of t(is<ection5 deri)ed for eac( taxa$le yearfrom all sources #it(in t(e P(ilippines$y an indi)idual cit iHen of t(eP(ilippines #(o is residing outside of t(e P(ilippines including o)erseascontract #or3ers referred to in<u$section*+ of <ection 2/ (ereof4and

*c n t(e taxa$le income dened in<ection /1 of t(is code5 ot(er t(anincome su$ect to tax under

<u$sections *B5 *+ and *C of t(is<ection5 deri)ed for eac( taxa$le yearfrom all sources #it(in t(e P(ilippines$y an indi)idual alien #(o is a residentof t(e P(ilippines.

*2 Rates of ax on axa$le 6ncome of 6ndi)iduals. - (e tax s(all $ecomputed in accordance #it( and att(e rates esta$lis(ed in t(e follo#ingsc(edule:

Not o)er P105000

V ;Q)er P105000 $ut not o)er P/05000V P;00`10Q of excess o)er

P105000)er P/05000 $ut not o)er PA05000

V P25;00`1;Q of t(e excess o)erP/05000

)er PA05000 $ut not o)er P1'05000V P&5;00`20Q of t(e excess o)er

PA05000)er P1'05000 $ut not o)er P2;05000

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V P22 ;00`2;Q of t(e excess re?uirements of #it((olding tax on



V P225;00`2;Q of t(e excesso)er P1'05000

)er P2;05000 $ut not o)er P;005000V P;05000`/0Q of t(e excess

o)er P2;05000)er P;005000

V P12;5000`/2Q of t(e excesso)er P;005000

For married indi)iduals5 t(e (us$andand #ife5 su$ect to t(e pro)ision of <ection ;1 *C (ereof5 s(all computeseparately t(eir indi)idual income tax$ased on t(eir respecti)e total taxa$leincome: Pro)ided5 t(at if any incomecannot $e denitely attri$uted to oridentied as income exclusi)ely earnedor realiHed $y eit(er of t(e spouses5

t(e same s(all $e di)ided e?ually$et#een t(e spouses for t(e purposeof determining t(eir respecti)e taxa$leincome.

Pro)ided5 (at minimum #age earnersas dened in <ection 22 *99 of t(is+ode s(all $e exempt from t(epayment of income tax on t(eirtaxa$le income: Pro)ided5 furt(er5 (att(e (oliday pay5 o)ertime pay5 nig(ts(ift diKerential pay and (aHard pay

recei)ed $y suc( minimum #ageearners s(all li3e#ise $e exempt fromincome tax.

RR 10$00O S1;amending RR 0$O S$.%O.1;B<<

BEe)"%o$( ,!o) ?%--old$* Ta o$Co)"e$(a%o$.- (e follo#ing incomepayments are exempted from t(e

re?uirements of #it((olding tax oncompensation:

xxx xxx xxx

*1/ +ompensation income of =W>s #(o #or3in t(e pri)ate sector and $eing paid t(e<tatutory =inimum Wage *<=W5 as xed$y Regional ripartite Wage andProducti)ity Board *RWPB NationalWages and Producti)ity +ommission*NWP+5 applica$le to t(e place #(ere(es(e is assigned.

(e aforesaid income s(all li3e#ise $eexempted from income tax.

<tatutory =inimum Wage@ *<=W s(allrefer to t(e rate xed $y t(e Regional

ripartite Wage and Producti)ity Board*RWPB5 as dened $y t(e Bureau of ,a$or and >mployment <tatistics *B,>< of t(e Cepartment of ,a$or and >mployment*C,>. (e RWPB of eac( region s(alldetermine t(e #age rates in t(e diKerentregions $ased on esta$lis(ed criteria ands(all $e t(e $asis of exemption fromincome tax for t(is purpose.

9oliday pay5 o)ertime pay5 nig(t s(iftdiKerential pay and (aHard pay earned $y

t(e aforementioned =W> s(all li3e#ise $eco)ered $y t(e a$o)e exemption.Pro)ided5 (o#e)er5 t(at an employee #(orecei)esearns additional compensationsuc( as commissions5 (onoraria5 fringe$enets5 $enets in excess of t(eallo#a$le statutory amount of P/05000.005taxa$le allo#ances and ot(er taxa$leincome ot(er t(an t(e <=W5 (oliday pay5o)ertime pay5 (aHard pay and nig(t s(iftdiKerential pay s(all not enoy t(e

111




t(e aforementioned =W> in t(e pu$lic 6n case of (aHardous employment5 t(e



t(e aforementioned =W> in t(e pu$licsector s(all li3e#ise $e co)ered $y t(ea$o)e exemption. Pro)ided5 (o#e)er5 t(ata pu$lic sector employee #(o recei)esadditional compensation suc( ascommissions5 (onoraria5 fringe $enets5$enets in excess of t(e allo#a$lestatutory amount of P/05000.005 taxa$leallo#ances and ot(er taxa$le incomeot(er t(an t(e <=W5 (oliday pay5 o)ertimepay5 nig(t s(ift diKerential pay and (aHardpay s(all not enoy t(e pri)ilege of $eing a=W> and5 t(erefore5 (is(er entireearnings are not exempt from income taxand5 conse?uently5 from #it((olding tax.

=W>s recei)ing ot(er income5 suc( asincome from t(e conduct of trade5$usiness5 or practice of profession5 exceptincome su$ect to nal tax5 in addition tocompensation income are not exemptedfrom income tax on t(eir entire incomeearned during t(e taxa$le year. (is rule5not#it(standing5 t(e <=W5 9oliday pay5o)ertime pay5 nig(t s(ift diKerential payand (aHard pay s(all still $e exempt from#it((olding tax.

For purposes of t(ese regulations5 (aHardpay s(all mean t(e amount paid $y t(e

employer to =W>s #(o #ere actuallyassigned to danger or strife-torn areas5disease-infested places5 or in distressed orisolated stations and camps5 #(ic( exposet(em to great danger of contagion or perilto life. ny (aHard pay paid to =W>s#(ic( does not satisfy t(e a$o)e criteria isdeemed su$ect to income tax andconse?uently to #it((olding tax.

6n case of (aHardous employment5 t(eemployer s(all attac( to t(e =ont(lyRemittance Return of Wit((olding ax on+ompensation *B6R Form No. 1"01+ forreturn periods =arc(5 Dune5 <eptem$erand Cecem$er a copy of Cepartment of Budget and =anagement *CB= circulars5or e?ui)alent5 as to #(o are allo#ed torecei)e (aHard pay.

BASIS +OR COMPUTATION O+ STATUTORK MINIMUM ?AGE

RR 10$00O S$;inserting S$.%O.@ in RR 0$O<

Sec. 6.<5.9. Co)"'%a%o$ o, ?a*e(.

(e $asis of t(e computation of t(e minimum#age rates prescri$ed $y la# s(all $e t(enormal #or3ing time of eig(t *& (ours a day.

(e computation of #ages s(all $e inaccordance #it( t(e +ollecti)e Bargaininggreement *+B5 if any5 or t(e pro)isions of t(e ,a$or +ode as implemented. nlessot(er#ise amended or repealed $ysu$se?uent pertinent la#s5 rules andregulations5 t(e (oliday pay5 o)ertime pay5nig(t s(ift diKerential and (aHard pay s(all $e

understood to $e computed $ased on suc(agreement or la$or la# pro)isions.

6n t(e determination of t(e minimum #age ona mont(ly $asis5 t(e #it((olding agent s(all$e guided $y t(e pre)ailing minimum #age asre[ected in t(e latest =atrix of Wage rderand its o#n policy on #(et(er employees are*a not considered paid on <aturdays and<undays or rest days5 *$ not considered paidon <undays or rest days5 *c considered paid

11


on rest days5 special days and regular t(e semi- mont(ly at P"52'A.00 and #ee3ly at



y 5 p y g(olidays5 or *d re?uired to #or3 e)erydayincluding <undays or rest days5 special daysand regular (olidays. (e resulting num$er of days in t(e a$o)e enumerated categories arereferred to as t(e factor or num$er of #or3ingpaid days in a year. *nnex IBJ

n t(e rst classication5 t(e mont(ly <=W iscomputed $y multiplying t(e applica$le daily#age rate $y t(e factor of 2"1 days anddi)ide t(e same $y t#el)e4 t(e semi-mont(lyat one-(alf *12 of t(e mont(ly rate and t(e#ee3ly <=W is arri)ed at $y spreading t(eannual minimum $asic #age o)er fty-t#o*;2 #ee3s. (us5 on a P/&2.00 minimumdaily #age in =etro =anila5 t(e mont(ly <=Wis P&5/0&.005 t(e semi- mont(ly at P'51;'.00and #ee3ly at P15%1A.00.

n t(e second category5 t(e mont(ly <=W iscomputed $y multiplying t(e applica$le daily#age rate $y t(e factor of /1/ days anddi)ide t(e product $y t#el)e. 9ence5 on aP/&2.00 minimum daily #age5 t(e mont(ly<=W is P%5%"'.005 t(e semi- mont(ly atP'5%&2.00 and #ee3ly at P25/00.00.

n t(e t(ird classication5 t(e mont(ly <=Wis computed $y multiplying t(e applica$le

daily #age rate $y t(e factor of /"; days5di)ided $y t#el)e. (us5 on a /&2 minimumdaily #age5 t(e mont(ly <=W is P115"1%.005t(e semi-mont(ly at P;5&10.00 and #ee3ly atP25"&1.00.

n t(e fourt( classication5 t(e mont(ly <=Wis computed $y multiplying t(e applica$ledaily #age rate $y t(e factor of /%2.; days5di)ided $y t#el)e. 9ence5 on a /&2 minimumdaily #age5 t(e mont(ly <=W is P125'%;.005

y 5 yP25&&/.00.

x------------------------------------x

<. PERSONAL EEMPTIONS

National /nternal Re&enue Code S@ ;A< 9 ;B<;amended by RA @0D SD 9 N/RC S@ ;C< 9 ;*<<

SEC. 79. Alloa$ce o, Pe!(o$alEe)"%o$ ,o! I$d#d'al Ta"aye!. -

* 6n General. - For purposes of determiningt(e tax pro)ided in <ection 2'* of t(is itle5 t(ere s(all $e allo#ed a $asicpersonal exemption amounting to Fiftyt(ousand pesos *P;05000 for eac(indi)idual taxpayer.

6n t(e case of married indi)iduals #(ereonly one of t(e spouses is deri)ing grossincome5 only suc( spouse s(all $e allo#edt(e personal exemption.

*B dditional >xemption for Cependents. - (ere s(all $e allo#ed an additionalexemption of #enty-)e t(ousand pesos*P2;5 for eac( dependent notexceeding four *'.

(e additional exemption for dependentss(all $e claimed $y only one of t(espouses in t(e case of married indi)iduals.

6n t(e case of legally separated spouses5additional exemptions may $e claimedonly $y t(e spouse #(o (as custody of t(ec(ild or c(ildren:

11!


Pro)ided5 (at t(e total amount of *C Personal >xemption llo#a$le to



additional exemptions t(at may $eclaimed $y $ot( s(all not exceed t(emaximum additional exemptions (ereinallo#ed.

For purposes of t(is <u$section5 aZdependentZ means a legitimate5illegitimate or legally adopted c(ild c(ie[ydependent upon apd li)ing #it( t(etaxpayer if suc( dependent is not moret(an t#enty-one *21 years of age5unmarried and not gainfully employed or if suc( dependent5 regardless of age5 isincapa$le of self-support $ecause of mental or p(ysical defect.

*+ +(ange of <tatus. - 6f t(e taxpayer marriesor s(ould (a)e additional dependent*s asdened a$o)e during t(e taxa$le year5 t(etaxpayer may claim t(e correspondingadditional exemption5 as t(e case may $e5in full for suc( year.

6f t(e taxpayer dies during t(e taxa$leyear5 (is estate may still claim t(epersonal and additional exemptions for(imself and (is dependent*s as if (e diedat t(e close of suc( year.

6f t(e spouse or any of t(e dependentsdies or if any of suc( dependents marries5$ecomes t#enty-one *21 years old or$ecomes gainfully employed during t(etaxa$le year5 t(e taxpayer may still claimt(e same exemptions as if t(e spouse orany of t(e dependents died5 or as if suc(dependents married5 $ecame t#enty-one*21 years old or $ecame gainfullyemployed at t(e close of suc( year.

* pNonresident lien 6ndi)idual. - nonresident alien indi)idual engaged intrade5 $usiness or in t(e exercise of aprofession in t(e P(ilippines s(all $eentitled to a personal exemption in t(eamount e?ual to t(e exemptions allo#edin t(e income tax la# in t(e country of #(ic( (e is a su$ect - or citiHen5 tocitiHens of t(e P(ilippines not residing insuc( country5 not to exceed t(e amountxed in t(is <ection as exemption forcitiHens or resident of t(e P(ilippines:Pro)ided5 (at said nonresident aliens(ould le a true and accurate return of t(e total income recei)ed $y (im from allsources in t(e P(ilippines5 as re?uired $yt(is itle.

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5. ?ITHHOLDING TA ON COMPENSATION INCOME&.1 +ompensation

National /nternal Re&enue Code S%O ;A<

SEC. <5. De$%o$(. - s used in t(is+(apter:

* Wages. - (e term Z#agesZ means all

remuneration *ot(er t(an fees paid to apu$lic oLcial for ser)ices performed $yan employee for (is employer5 includingt(e cas( )alue of all remuneration paid inany medium ot(er t(an cas(5 except t(atsuc( term s(all not include remunerationpaid:

*1 For agricultural la$or paid entirely inproducts of t(e farm #(ere t(e la$or isperformed5 or

11"


*2 For domestic ser)ice in a pri)ate entertainment and t(e li3e4 fees including



p(ome5 or

*/ For casual la$or not in t(e course of t(e employerZs trade or $usiness5 or

*' For ser)ices $y a citiHen or resident of t(e P(ilippines for a foreigngo)ernment or an internationalorganiHation.

6f t(e remuneration paid $y an employer to anemployee for ser)ices performed during one-(alf *12 or more of any payroll period of notmore t(an t(irty-one */1 consecuti)e daysconstitutes #ages5 all t(e remuneration paid$y suc( employer to suc( employee for suc(period s(all $e deemed to $e #ages4 $ut if t(e remuneration paid $y an employer to anemployee for ser)ices performed during moret(an one -(alf *12 of any suc( payroll perioddoes not constitute #ages5 t(en none of t(eremuneration paid $y suc( employer to suc(employee for suc( period s(all $e deemed to$e #ages.

RR 0$O S$.%O.1;A< paragraphs 1D

SECTION 6.<5.1. ?%--old$* o, I$co)e Ta o$ Co)"e$(a%o$ I$co)e. ]

* +ompensation 6ncome Cened. ] 6n

general5 t(e term \compensation\ meansall remuneration for ser)ices performed $yan employee for (is employer under anemployer-employee relations(ip5 unlessspecically excluded $y t(e +ode.

(e name $y #(ic( t(e remuneration forser)ices is designated is immaterial. (us5salaries5 #ages5 emoluments and(onoraria5 allo#ances5 commissions *e.g.transportation5 representation5

gdirectorZs fees5 if t(e director is5 at t(esame time5 an employee of t(eemployercorporation4 taxa$le $onusesand fringe $enets except t(ose #(ic( aresu$ect to t(e fringe $enets tax under<ec. // of t(e +ode4 taxa$le pensions andretirement pay4 and ot(er income of asimilar nature constitute compensationincome.

(e $asis upon #(ic( t(e remuneration ispaid is immaterial in determining #(et(ert(e remuneration constitutescompensation. (us5 it may $e paid on t(e$asis of piece-#or35 or a percentage of prots4 and may $e paid (ourly5 daily5#ee3ly5 mont(ly or annually.

Remuneration for ser)ices constitutescompensation e)en if t(e relations(ip of employer and employee does not existany longer at t(e time #(en payment ismade $et#een t(e person in #(oseemploy t(e ser)ices (ad $een performedand t(e indi)idual #(o performed t(em.

*1 +ompensation paid in 3ind. ]+ompensation may $e paid in moneyor in some medium ot(er t(an money5

as for example5 stoc3s5 $onds or ot(erforms of property. 6f ser)ices are paidfor in a medium ot(er t(an money5 t(efair mar3et )alue of t(e t(ing ta3en inpayment is t(e amount to $e includedas compensation su$ect to#it((olding. 6f t(e ser)ices arerendered at a stipulated price5 in t(ea$sence of e)idence to t(e contrary5suc( price #ill $e presumed to $e t(efair mar3et )alue of t(e remuneration

11#


recei)ed. 6f a corporation transfers to employer s(all ma3e necessary



its employees its o#n stoc3 asremuneration for ser)ices rendered $yt(e employee5 t(e amount of suc(remuneration is t(e fair mar3et )alueof t(e stoc3 at t(e time t(e ser)ices#ere rendered.

*2 ,i)ing ?uarters or meals. ] 6f a personrecei)es a salary as remuneration forser)ices rendered5 and in additiont(ereto5 li)ing ?uarters or meals arepro)ided5 t(e )alue to suc( person of t(e ?uarters and meals so furnis(eds(all $e added to t(e remunerationpaid for t(e purpose of determiningt(e amount of compensation su$ect to#it((olding. 9o#e)er5 if li)ing ?uartersor meals are furnis(ed to an employeefor t(e con)enience of t(e employer5t(e )alue t(ereof need not $e includedas part of compensation income.

*/ Facilities and pri)ileges of a relati)elysmall )alue. ] rdinarily5 facilitiesand pri)ileges *suc( as entertainment5medical ser)ices5 or so called\courtesy\ discounts on purc(ases5furnis(ed or oKered $y an employer to(is employees generally5 are notconsidered as compensation su$ect to#it((olding if suc( facilities orpri)ileges are of relati)ely small )alueand are oKered or furnis(ed $y t(eemployer merely as a means of promoting t(e (ealt(5 good#ill5contentment5 or eLciency of (isemployees.

W(ere compensation is paid inproperty ot(er t(an money5 t(e

arrangements to ensure t(at t(eamount of t(e tax re?uired to $e#it((eld is a)aila$le for payment tot(e +ommissioner.

*' ips and gratuities. ] ips or gratuitiespaid directly to an employee $y acustomer of t(e employer #(ic( arenot accounted for $y t(e employee tot(e employer are considered astaxa$le income $ut not su$ect to#it((olding.

x------------------------------------x

&.2 Cuty to #it((old taxes on t(e part of t(e employer

National /nternal Re&enue Code S$$ ;7<

*X (e term \#it((olding agent\ means anyperson re?uired to deduct and #it((oldany tax under t(e pro)isions of <ection ;A.

National /nternal Re&enue Code S@% ;A< 9 ;B<

* Wit((olding of Final ax on +ertain6ncomes. - <u$ect to rules and regulationst(e <ecretary of Finance may promulgate5upon t(e recommendation of t(e+ommissioner5 re?uiring t(e ling of income tax return $y certain incomepayees5 t(e tax imposed or prescri$ed $y<ections 2'*B*15 2'*B*25 2'*+5 2'*C*14 2;**25 2;**/5 2;*B5 2;*+5 2;*C52;*>5 2A*C*M5 2A*C*25 2A*C*/5 2A*C*;5 2& **'5 2&**;5 2&**A*a5 2&**A*$5 2&**A*c5 2&*B*15 2&*B*252&*B*/5 2&*B*'5 2&*B*;*a5 2&*B*;*$5 2&*B*;*c4 //4 and 2&2 of t(is +odeon specied items of income s(all $e

11$


#it((eld $y payor-corporation andor employer from lia$ility for any penalty or



person and paid in t(e same manner andsu$ect to t(e same conditions as pro)idedin <ection ;& of t(is +ode.

*B Wit((olding of +redita$le ax at <ource. - (e <ecretary of Finance may5 upon t(erecommendation of t(e +ommissioner5re?uire t(e #it((olding of a tax on t(eitems of income paya$le to natural or uridical persons5 residing in t(eP(ilippines5 $y payor-corporationpersonsas pro)ided for $y la#5 at t(e rate of notless t(an one percent *1Q $ut not moret(an t(irty-t#o percent */2Q t(ereof5#(ic( s(all $e credited against t(e incometax lia$ility of t(e taxpayer for t(e taxa$leyear.

National /nternal Re&enue Code S% ;A< 9 ;B<

* Re?uirement of Wit((olding.->xcept in t(ecase of a minimum #age earner asdened in <ection 22*99 of t(is +ode5e)ery employer ma3ing payment of #agess(all deduct and #it((old upon suc(#ages a tax determined in accordance#it( t(e rules and regulations to $eprescri$ed $y t(e <ecretary of Finance5upon recommendation of t(e+ommissioner.

*B ax Paid $y Recipient. - 6f t(e employer5 in)iolation of t(e pro)isions of t(is +(apter5fails to deduct and #it((old t(e tax asre?uired under t(is +(apter5 andt(ereafter t(e tax against #(ic( suc( taxmay $e credited is paid5 t(e tax sore?uired to $e deducted and #it((eld s(allnot $e collected from t(e employer4 $utt(is <u$section s(all in no case relie)e t(e

addition to t(e tax ot(er#ise applica$le inrespect of suc( failure to deduct and#it((old.

National /nternal Re&enue Code SO0 ;A<

* >mployer. - (e employer s(all $e lia$lefor t(e #it((olding and remittance of t(ecorrect amount of tax re?uired to $ededucted and #it((eld under t(is +(apter.6f t(e employer fails to #it((old and remitt(e correct amount of tax as re?uired to$e #it((eld under t(e pro)ision of t(is+(apter5 suc( tax s(all $e collected fromt(e employer toget(er #it( t(e penaltiesor additions to t(e tax ot(er#iseapplica$le in respect to suc( failure to#it((old and remit.

x------------------------------------x

&./ >mployer->mployee

National /nternal Re&enue Code S%O ;C< 9 ;*<

*+ >mployee. - (e term ZemployeeZ refers toany indi)idual #(o is t(e recipient of #ages and includes an oLcer5 employeeor elected oLcial of t(e Go)ernment of t(e P(ilippines or any political su$di)ision5agency or instrumentality t(ereof. (eterm \employee\ also includes an oLcerof a corporation.

*C >mployer. - (e term \employer\means t(e person for #(om an indi)idualperforms or performed any ser)ice5 of #(ate)er nature5 as t(e employee of suc(person5 except t(at:

11%


*1 6f t(e person for #(om t(e indi)idualf f d i

t(e ser)ices are performed. 6t is suLcient t(at (e( ( i ( d



performs or performed any ser)icedoes not (a)e control of t(e paymentof t(e #ages for suc( ser)ices5 t(eterm \employer\ *except for t(epurpose of <u$section * means t(eperson (a)ing control of t(e paymentof suc( #ages4 and

*2 6n t(e case of a person paying #ageson $e(alf of a nonresident alienindi)idual5 foreign partners(ip orforeign corporation not engaged intrade or $usiness #it(in t(eP(ilippines5 t(e term \employer\*except for t(e purpose of <u$section* means suc( person.

RR No. 0$O SS$.%O. 9 $.%O.D

SECTION 6.<5.7. E)"loyee. ] (e term\employee\ is an indi)idual performing ser)icesunder an employer-employee relations(ip. (eterm co)ers all employees5 including oLcers andemployees5 #(et(er elected or appointed5 of t(eGo)ernment of t(e P(ilippines5 or any politicalsu$di)ision t(ereof or any agency orinstrumentality.

6n general5 t(e relations(ip of t(e employer andemployee exists #(en t(e person for #(omser)ices #ere performed (as t(e rig(t to controland direct t(e indi)idual #(o performs t(eser)ices5 not only as to t(e result to $eaccomplis(ed $y t(e #or3 $ut also as to t(edetails and means $y #(ic( t(e result isaccomplis(ed. n employee is su$ect to t(e #illand control of t(e employer not only as to #(ats(all $e done5 $ut (o# it s(all $e done. 6n t(isconnection5 it is not necessary t(at t(e employeractually directs or controls t(e manner in #(ic(

(as t(e rig(t to do so.

(e rig(t to dismiss an employee is also animportant factor indicating t(at t(e personpossessing t(at rig(t is an employer. t(erfactors or c(aracteristics of an employer5 #(ic(may not $e necessarily present in e)ery case5 arefurnis(ing t(e tools and furnis(ing of a place to#or35 to t(e indi)idual #(o performs t(e ser)ices.6n general5 an indi)idual is not considered anemployee if (e is su$ect to t(e control ordirection of anot(er merely on to t(e result to $eaccomplis(ed $y t(e #or35 and not on to t(emeans and met(ods for accomplis(ing t(e result.6n general5 indi)iduals #(o follo# an independenttrade5 $usiness5 or profession5 in #(ic( t(ey oKert(eir ser)ices to t(e pu$lic5 are not employees.

(e measurement5 met(od or designation of compensation is also immaterial if t(erelations(ip of employer and employee in factexists.

No distinction is made $et#een classes or gradesof employees. (us superintendents5 managers5and ot(ers $elonging to similar le)els areemployees. n oLcer of a corporation is anemployee of t(e corporation. n indi)idual5performing ser)ices for a corporation5 $ot( as anoLcer and director5 is an employee su$ect to#it((olding on compensation5 including directorZsfees.

SECTION 6.<5.8. E)"loye!. ] (e termemployer means any person for #(om anindi)idual performs or performed any ser)ice5 of #(ate)er nature5 under an employer-employeerelations(ip. 6t is not necessary t(at t(e ser)ices$e continuing at t(e time t(e #ages are paid inorder t(at t(e status of employer may exist. (us

11&


for purposes of #it((olding5 a person for #(omi di id l ( f d t i d

t(e statements re?uired under t(e la#.N t( l t( l l i$ilit f



an indi)idual (as performed past ser)ices andfrom #(om (e is still recei)ing compensation isan \employee\.

* Person for #(om t(e ser)ices are or #ereperformed does not (a)e control. ] (e term\employer\ also refers to t(e person (a)ingcontrol of t(e payment of t(e compensation incases #(ere t(e ser)ices are or #ereperformed for a person #(o does not exercisesuc( control. For example5 #(erecompensation5 suc( as certain types of pensions or retirement pay5 are paid $y atrust and t(e person for #(om t(e ser)ices#ere performed (as no control o)er t(epayment of suc( compensation5 t(e trust isdeemed to $e t(e \employer\.

*B Person paying compensation on $e(alf of anonresident. ] (e term \employer\ alsomeans any person paying compensation on$e(alf of a non-resident alien indi)idual5foreign partners(ip5 or foreign corporation5#(o is not engaged in trade or $usiness#it(in t(e P(ilippines.

6t is t(e responsi$ility of t(e employer to#it((old5 pay5 or refund t(e tax and furnis(t(e statements re?uired under t(eseRegulations. (e term \employer\ as denedin * and *B a$o)e is intended to determine#(o is t(e #it((olding agent.s a matter of $usiness administration5certain mec(anical details of t(e #it((oldingprocess may $e (andled $y representati)es of t(e employer. (us5 in t(e case of a corporateemployer #it( $ranc( oLces5 t(e $ranc(manager or ot(er representati)e mayactually5 as a matter of internaladministration5 #it((old t(e tax or prepare

Ne)ert(eless5 t(e legal responsi$ility for#it((olding5 paying and returning t(e tax andfurnis(ing suc( statements rests #it( t(ecorporate employer.

n employer may $e an indi)idual5 acorporation5 a partners(ip5 a trust5 an estate5a oint-stoc3 company5 an association5 or asyndicate5 group5 pool5 oint )enture5 or ot(erunincorporated organiHation5 group or entity. trust or estate5 rat(er t(an t(e duciaryacting for or on $e(alf of t(e trust or estate5 isgenerally t(e employer.

(e term \employer\ em$races not only anindi)idual and an organiHation engaged intrade or $usiness5 $ut it also includes anorganiHation exempt from income tax5 suc( asc(arita$le and religious organiHations5 clu$s5social organiHations and societes5 as #ell ast(e Go)ernment of t(e P(ilippines5 includingits agencies5 instrumentalities5 and politicalsu$di)isions.

*+ +ompensation paid on $e(alf of t#o or moreemployers. ] 6f a payment of compensationis made to an employee $y an employert(roug( an agent5 duciary5 or ot(er person#(o (as t(e control5 receipt5 custody5 ordisposal of5 or pays t(e compensation paya$le$y anot(er employer to suc( employee5 t(eamount of tax re?uired to $e #it((eld on eac(compensation payment made t(roug( suc(agent5 duciary5 or person s(all5 #(et(er t(ecompensation is paid separately on $e(alf of eac( employer or paid in lump-sum on $e(alf of all suc( employers5 $e determined $asedon t(e aggregate amount of suc(compensation payment or payments in t(esame manner as if suc( aggregate amount

120


(ad $een paid $y one employer. 9ence5 t(et ( ll $ d t i d $ d t(

INCOME TA - <ection 2.A% of Re)enueR l ti N 2 %& id t( t



tax s(all $e determined $ased on t(eaggregate amount of t(e compensation paid.

6n any suc( case5 eac( employer s(all $elia$le for t(e return and payment of a pro-rataportion of t(e tax so determined inaccordance #it( t(e ratio of t(e amountcontri$uted $y eac( employer relati)e to t(eaggregate of suc( compensation.

duciary5 agent5 or ot(er person acting fort#o or more employers may $e aut(oriHed to#it((old t(e tax under t(ese regulations #it(respect to t(e #ages of t(e employees of suc( employers. <uc( duciary5 agent5 orot(er person may also $e aut(oriHed to ma3eand le returns of t(e tax #it((eld at sourceon suc( compensation and to furnis( t(ereceipts re?uired under t(ese Regulations.pplication for t(e aut(oriHation to performsuc( act s(ould $e addressed to t(e+ommissioner or (is duly aut(oriHedrepresentati)e. 6f suc( aut(ority is granted $yt(e +ommissioner5 all pro)isions of t(e la#*including penalties and regulationsprescri$ed in pursuance of t(e la# applica$lein respect of an employer for #(om suc(duciary5 agent or ot(er person acts s(allremain su$ect to all pro)isions of la#*including penalties and regulationsprescri$ed in pursuance of t(e la# applica$lein respect of employers.

x------------------------------------x

&./.1 Application o# Rules on Responsibility as +ithholding Agent &is&is mployermployee ,cenarios

B/R Ruling 1$O ;*e la ,alle 5ni&ersity<

Regulations No. 2-%&5 pro)ides t(at e)eryemployer must #it((old from compensationpaid5 an amount computed in accordance #it(t(ese regulations. Pro)ided5 t(at no#it((olding of tax s(all $e re?uired #(ere t(etotal compensation income of an indi)idualdoes not exceed t(e statutory minimum #ageof )e t(ousand pesos *P;5000.00 mont(ly orsixty t(ousand pesos *P"05000.00 a year5#(ic(e)er is (ig(er. (e term \employer\ isdened as any person paying compensationon $e(alf of a non-resident alien indi)idual5foreign partners(ip5 or foreign corporation5#(o is not engaged in trade or $usiness#it(in t(e P(ilippines pursuant to <ection2.A&.'*B of t(e said Re)enue Regulations.

(e income earned $y t(e proect staK of t(eCe ,a <alle are compensation income #(ereint(e ni)ersity (as t(e responsi$ility of #it((olding t(e tax as an employer payingcompensation on $e(alf of a non- residentalien indi)idual5 foreign partners(ip5 or foreigncorporation5 #(o is not engaged in trade or$usiness #it(in t(e P(ilippines.

(e incenti)e gi)en to faculty mem$ers of Ce,a <alle ni)ersity #(o are doing researc(proects for t(e ni)ersity can $e e?uated to aproducti)ity incenti)e and a producti)ityincenti)e is a fringe $enet. For super)isoryand managerial employees5 one of t(e fringe$enets t(at is not su$ect to t(e fringe$enets tax are \de minimis $enets.\

(e producti)ity incenti)e gi)en is no longersu$ect to t(e P125000.00 t(res(old $ut t(esame5 plus t(e 1/t( mont( pay not exceedingP/05000.00 are excluded from gross incomeand t(erefore exempt from taxation pursuant

121




one employer. <ince t(e ni)ersity (as t(econtrol receipt custody or disposal of or is

compensation income *<ection 2.A&.15 RR No.2 %& ccordingly t(e director@s fees



control5 receipt5 custody or disposal of or ist(e one #(o pays t(e compensation paya$le$y anot(er employer5 t(e ni)ersity is undero$ligation to #it((old t(e correspondingincome tax and remit t(e same to t(e Bureauof 6nternal Re)enue on $e(alf of t(e saidemployers. *B6R Ruling No. 12&-%% datedugust 1&5 1%%%

x------------------------------------x

&./.2 Board o# *irectorIs ees

R4C No. D$00O ;Ta Treatment o# *irectorIs ees #or /ncome Ta and Business Ta 'urposes<

REENUE MEMORANDUM CIRCULAR NO.7836>>5 issued on pril 1&5 200& claries t(etax treatment of director@s fees for 6ncome axand $usiness tax purposes.

nder section A%5 in relation to <ection 2'*5$ot( of t(e National 6nternal Re)enue +ode*ax +ode5 as amended5 director@s fees aresu$ect to t(e #it((olding tax on #ages. (esaid tax treatment applies #(ene)er it isesta$lis(ed t(at t(e director and t(ecorporation (as an employer-employeerelations(ip *i.e President of a corporationsitting as a mem$er of t(e Board of Cirectors.

Re)enue Regulations *RR No. 2-%& pro)idest(at It(e term IcompensationJ means allremuneration for ser)ices performed $y anemployee for (is employer under anemployer-employee relations(ip5 unlessspecically excluded $y t(e +ode. (us5 feesincluding director@s fees5 if t(e director is5 att(e same time5 an employee of t(eemployercorporation constitute

2-%&. ccordingly5 t(e director s feesrecei)ed $y employees are exempt from t(ealue -dded ax * under <ection 10% of t(e ax +ode.

9o#e)er5 if t(ese fees are paid to a director#(o is not an employee of t(e corporationpaying suc( fees *i.e. #(ose duties areconned to t(e attendance of andparticipation in t(e meetings of t(e $oard of directors5 suc( fees are not treated ascompensation income $ecause of t(e a$senceof employer-employee relations(ip5 $utrat(er5 t(e same s(ould s?uarely fall under<ection /2**2 of t(e ax +ode under t(ecaption IGross income deri)ed from t(econduct of trade or $usiness or exercise of aprofession.J (e fees recei)ed $y t(e director#(o is not an employee of t(e payorcorporation are su$ect to ten percent *10Qcredita$le #it((olding tax if (is gross incomefor t(e current year do not exceed PA205000.00 or fteen percent *1;Q if (isgross income exceeds P A205000.00 pursuantto RR No. /0-200/. (ese payments fall underIProfessional Fees5 talent fees5 etc.5 forser)ices rendered $y indi)idualsJ #(ic(include under its pur)ie# IFees of directors#(o are not employees of t(e companypaying suc( fees5 #(ose duties are connedto attendance at and participation in meetingsof t(e $oard of directors.J *<ection 2.;A.2**%5 RR No. 2-%&. 6t is also emp(asiHed t(att(e amount su$ect to t(e 10Q or1;Qcredita$le #it((olding tax is not onlyconned to fees5 $ut also per diems5allo#ances and any ot(er form of incomepayment made to t(e director.

12


side from $eing lia$le to t(e payment of t(e6ncome ax imposed under itle 66 of t(e ax

n t(e ot(er (and5 t(e term \fringe $enet\means any good ser)ice or ot(er $enet



6ncome ax imposed under itle 66 of t(e ax+ode5 t(ese directors #(o are not employees5(a)ing recei)ed fees #(ic( (ad $eensu$se?uently reported in t(eir annual 6ncome ax Returns as part of t(eir gross incomes(ould li3e#ise $e lia$le to pay $usiness tax

on account of suc( receipt of income. (eyfall under t(e category of sellers of ser)icesunder itle 6 of t(e ax +ode #(o are lia$leto pay t(e 12Q on t(eir gross receiptspursuant to <ection 10& t(ereof5 or to t(et(ree percent */Q Percentage ax imposedunder <ection 11"5 s(ould t(ey fail to meett(e t(res(old.

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&././ *onations to 4issionaries

B/R Ruling No. *A00D

6n reply t(ereto5 please $e informed t(at t(e<uperintendent of t(e Nor#egian missionaries#(o does not recei)e any xed salary $ut onlygifts and free-#ill oKerings from a$road andfrom indi)iduals and c(urc(es5 is exempt fromt(e payment of income tax and conse?uentlyfrom t(e ling of t(e corresponding incometax return. *B6R Ruling No. 0&2-%' dated pril'5 1%%'

<imilarly situated is B6R Ruling No. C1%"-00dated =arc( /05 20005 #(ere t(is Lce ruledt(at ]\. . . t(at since t(e nancial support $eingrecei)ed $y t(e foreign missionaries are notcompensation andor salary $ut meredonations5 said nancial support are not5t(erefore su$ect to P(ilippine income tax.\

means any good5 ser)ice or ot(er $enetfurnis(ed or granted $y an employer in cas(or in 3ind5 in addition to $asic salary5 to anindi)idual employee *except ran3 and leemployee. *see <ec. //*B5 ax +ode of 1%%A6t is clear t(at t(e aforesaid $enets are gi)en

to employees #(o are (olding managerial andsuper)isory positions. 6nasmuc( as foreignmissionaries are not employees in t(e strictsense of t(e la#5 as t(e nancial support$eing recei)ed $y t(em are not compensationor salary $ut mere donations5 t(e $enetsrecei)ed $y t(e Nor#egian missionaries in t(eP(ilippines s(ould t(erefore not $e su$ect tot(e fringe $enet tax prescri$ed in <ection//*B of t(e ax +ode of 1%%A.6N 6>W F 9> FR>G6NG5 t(is Lce (oldst(at t(e $asic mont(ly support and ot(er$enets recei)ed $y t(e Nor#egianmissionaries are exempt5 from t(e payment of income tax and t(e ling of t(e correspondingincome tax return5 as #ell as from t(e fringe$enet tax.

x------------------------------------x

&.' Cuties of t(e >mployee #it( respect to #it((olding taxes

RR 0$O SS$.%.1 9 $.%.$;as amended by RR 10$00O SD<

SECTION 6.<=.1. A""lca%o$ ,o!Re*(%!a%o$ ,o! I$d#d'al( Ea!$$*Co)"e$(a%o$ I$co)e BIR +o!) No.1=>6. ] (e application for registration of employees s(all $e accomplis(ed $y $ot(employer and employee relating to t(efollo#ing information and ot(er re?uirements:* >mployee. ]

12!


*1 NameaxpayerZs 6denticationNum$er *6Nddress of

procedures prescri$ed in t(is<ection4



Num$er *6Nddress of employeeot(er information re?uired$y t(e form4

*2 <tatus of employee #(et(er<6NG,>legally separated#ido# or

#ido#er #it( no dependent c(ild5married5 or (ead of t(e family4

*/ <tatus of spouse of t(e employee. ] 6f t(e employee is legally married5 t(eName6N5 if any5 of t(e spouse and#(et(er said spouse is employed5unemployed5 employed a$road5 or isengaged in trade or $usiness s(ould$e indicated on t(e application4

*' Oualied dependents. ] Name anddate of $irt( of ?ualied dependents*c(ildren5 parents5 $rot(ers5 sistersor senior citiHens4

*; +laimant of exemption for c(ildren. ] (e (us$and is t(e proper claimant of additional exemptions for ?ualiedc(ildren. 9o#e)er5 t(e #ife s(all claimfull additional exemption for c(ildren int(e follo#ing cases:*a 9us$and is unemployed4*$ 9us$and is a non-resident citiHen

deri)ing income from foreignsources4

*c (e (us$and #ai)es (is rig(t toclaim t(e exemptions of c(ildren*#ai)er s(ould $e for all c(ildrenin a s#orn statement to $eattac(ed to (is application form forregistration *1%02 and t(at of (is#ifeZs5 in accordance #it( t(e

<ection4

*" Re?uired forms and attac(ments Upon ling t(e pplication forRegistration *B6R Form No. 1%02 or+erticate of pdate of >xemption and

of >mployer@s and >mployee@s6nformation *B6R Form No. 2/0;5#(ic(e)er is applica$le5 t(e taxpayeris re?uired to attac( any of t(efollo#ing documents to esta$lis( t(estatus of t(e taxpayer5 if applica$le5 tot(e application:*a =arriage +ontract4*$ Birt( +erticate of eac( ?ualied

dependent c(ild*ren5 certied $yt(e ,ocal +i)il RegistryLceNational <tatistics Lce*N<e?ui)alent document issued$y a go)ernment oLce pre)iouslyre?uiring certied copy s(o#ingt(e name of parents and t(e nameof t(e OC+ #it( $irt(date *e.g.passport of OC+ as certied $ycompany@s 9uman Resource Lcer4

*c +erticate of employment of t(e(us$and if (e is #or3ing a$road4

*d <#orn Ceclaration and Wai)er of Rig(t to +laim >xemptions of Oualied Cependent +(ild*ren $yt(e 9us$and *nnex IFJ in case#ife is claiming t(e additionalexemptions of t(e c(ildren4

*e =edical +erticate of ?ualieddependent c(ild5 if p(ysicallymentally incapacitated4

*f +ourt decision of legal adoption of c(ildren4

*g Ceat( +erticate4 and

12"


*( t(er documentary e)idence5#(ere t(e a$o)e documents are

For an employee #it( successi)eemployment $eginning Duly " 200& to



#(ere t(e a$o)e documents arenot a)aila$le.

*A +oncurrent multiple employments. Un employee #(o is employedconcurrently $y t#o or more employers

#it(in t(e same period of time duringt(e taxa$le year s(all le t(epplication for Registration *B6R FormNo. 1%02 #it( (is main employer*employer to #(om t(e said employeerenders (is ser)ices for most of (istime during t(e taxa$le year and s(allfurnis( a copy of t(e duly recei)edpplication #it( (is secondaryemployers *2nd5 /rd5 etc. employers. (e employed (us$and and #ife s(alleac( le a separate application #it(t(eir respecti)e employers4

*& <uccessi)e multiple employment U nemployee #(o transferred to anot(eremployer during t(e taxa$le year5 s(allfurnis( (is ne# >mployer #it( a+erticate of pdate of >xemption andof >mployer@s and >mployee@s6nformation *B6R Form No. 2/0;indicating t(erein (is pre)iousemployments during t(e taxa$le year*name of employers5 addresses5 6Nsand t(e dates of (is separation andattac( to t(e said certicate5 a copy of t(e +erticate of +ompensationPayment ax Wit((eld *B6R Form No.2/1" for compensation payment #it(or #it(out #it((olding tax for t(ecalendar year issued $y pre)iousemployers.

employment $eginning Duly "5 200& toCecem$er /15 200&5 t(e employersfor t(e second semester s(all applyt(e pro-rated exemption pre)ailing fort(e rst semester ending Duly ;5 200&$ased on B6R Form No. 2/1" issued $y

t(e pre)ious employer #(ic( #assu$mitted $y t(e employee and t(epro-rated exemption pre)ailing for t(esecond semester ending Cecem$er /15200& in t(e computation of year-endadustment4

*% =ixed income. ] n indi)idualrecei)ing a com$ination of compensation and$usinessprofessional income s(all rstdeduct t(e allo#a$le personal andadditional exemptions fromcompensation income only t(e excesst(erefrom can $e deducted5 from$usiness or professional income. 6n t(ecase of (us$and and #ife5 t(e (us$ands(all $e t(e proper claimant of t(eexemptions unless (e #ai)es it in fa)orof (is #ife.

*B >mployer. ] (e employer #it( #(om t(epplication for Registration *Form No.1%02 is led5 must indicate t(e date of receipt t(ereon and accomplis( Part of t(e said pplication pertaining to>mployerZs 6nformation suc( as 6N5>mployerZs Registered Name5 and ot(errele)ant information.

*+ Procedures for t(e pplication forRegistration *Form No. 1%02 ]*1 ll employers s(all re?uire t(eir

employees to accomplis( in triplicate

12#


t(e pplication for Registration B6RForm 1%02 *riginal copy- RC4

accomplis(ing t(e portion of >mployer@s information of eit(er forms



Form 1%02 *riginal copy RC4Cuplicate- employer4 riplicate-employee descri$ed a$o)e as follo#s:*a Ne# employee s s(all accomplis(

and le t(e pplication forRegistration for 6ndi)iduals >arning

+ompensation 6ncome *B6R FormNo5 1%02 #it(in ten *10 days fromt(e date of employment4

*$ 6n case of c(anges in t(einformation data in t(e pplicationfor Registration *B6R Form No.1%02 pre)iously su$mitted $y t(eemployee5 consisting of c(anges instatus and personal and additionalexemptions5 employment#or3ingstatus of t(e spouse of t(eemployee5 multiple employmentstatus and amount of compensation income5 a +erticateof pdate of >xemption and of >mployerZs and >mployeeZs6nformation *B6R Form No. 2/0;re[ecting t(e c(anges5 toget(er#it( t(e re?uired documentse)idence of c(anges must $esu$mitted to t(e employer #it(inten *10 days after suc( c(ange. (e employer s(all t(en ma3e t(enecessary adustments on t(e#it((olding tax of t(e employee$ased on t(e ne# information4

*2 (e employer s(all transmit all copiesof t(e pplication for Registratio n *B6RForm No. 1%02 or +erticate of pdate of >xemption and of >mployer@s and >mployee@s6nformation *B6R Form No. 2/0;5#(ic(e)er is applica$le5 *after

>mployer s information of eit(er formsto t(e RC #(ere t(e employer isregistered #it(in t(irty */0 daysfollo#ing its receipt from t(eemployee. (e RC or (is dulyaut(oriHed representati)e5 #(ere t(e

employer is registered5 s(all recei)eand stamp t(e t(ree copies. (etriplicate copy duly stamped recei)ed$y t(e B6R s(all $e gi)en to t(eemployee.

*/ (e employer s(all re)ie# t(eexemptions of t(e employees ands(all5 in t(e computation of taxesre?uired to $e #it((eld on t(ecompensation of employees5 apply t(ecorrect and applica$le exemptions aspro)ided in t(ese regulations.

*' 6n case t(e (us$and #ai)es (is rig(t toclaim t(e additional exemptions of c(ildren in fa)or of (is #ife5 (e s(allaccomplis( a <#orn Ceclaration andWai)er of Rig(t to +laim >xemptions of Oualied Cependent +(ild*ren $y t(e9us$and *nnex IFJ in accordance#it( t(e follo#ing procedures:*a Fill up t(ree */ copies of t(e

prescri$ed #ai)er form *B6R FormNo.

*$ <u$mit t(e #ai)er form toget(er#it( t(e B6R Form No. 1%02 to (isemployer #it(in ten *10 days fromemployment5 for ac3no#ledgementin t(e space pro)ided for t(atpurpose.

(e employer of t(e (us$and s(all:

12$


*i fter lling up t(eac3no#ledgment portion of t(e

Wai)er exercised during t(e calendaryear s(all $e made only once in a



ac3no#ledgment portion of t(e#ai)er form5 retain t(eduplicate copy of t(e form andfurnis( t(e employee t(eoriginal and triplicate copies forsu$mission to t(e employer of

t(e #ife and for le of t(eemployee5 respecti)ely.

*ii <top deductions of additionalexemptions for ?ualieddependent c(ildren from t(e(us$andZs compensationincome starting t(e follo#ingmont(.

(e employer of t(e #ife s(all:pon receipt of copy of t(e #ai)erform duly ac3no#ledged $y t(e

employer of t(e (us$and5 startdeducting exemptions for c(ildrenfrom t(e #ifeZs income on t(e mont(#(en t(e employer of t(e (us$andstopped deducting t(e exemptions of c(ildren from t(e (us$andZs income.

*c (e employed (us$and and #ife s(allapply t(e #ai)er in t(e computation of t(eir respecti)e taxa$le income in t(eincome tax return re?uired to $e led$y t(em follo#ing t(e procedure forling t(e #ai)er under <ection 2.A%.1*+*' of t(ese regulations5 t(at is5 t(e(us$and s(all not deduct exemptionsof c(ildren from (is compensationincome $ecause (e (as #ai)ed t(esame *exemptions of c(ildren in fa)orof (is #ife #(o #ill no# deduct saidexemptions from (er income incomputing (er tax due.

year s(all $e made only once in acalendar year and s(all ta3e eKect fort(e present calendar year andsucceeding years until re)o3ed $y t(e(us$and. ny #ai)erre)ocation of suc( #ai)er s(all ta3e eKect only

starting t(e succeeding calendar year.6n no case s(ould an employer of t(e#ife deduct exemptions of c(ildrenfrom t(e #ifeZs income unless t(e#ai)er $y t(e (us$and (as $een dulyac3no#ledged $y t(e employer of t(e(us$and.

Registration of employees recei)ingpurely compensation income s(all $eat t(e RC (a)ing urisdiction o)er t(eemployee@s place of assignment

considering t(at t(e employee su$mitsapplication for registrationexemptionupdates to t(eir employer. 6n cases of multiple employment5 it s(all $e at t(eRC #(ere t(e main employer isregistered.

Sec. 6.<=.6 +al'!e %o le A""lca%o$ ,o!Re*(%!a%o$ BIR +o!) No. 1=>6 o!Ce!%ca%e o, U"da%e o, Ee)"%o$ a$do, E)"loye!( a$d E)"loyee(I$,o!)a%o$ BIR +o!) No. 67>9. U W(erean employee5 in )iolation of t(ese regulationseit(er fails or refuses to le an pplication forRegistration *B6R Form No. 1%02 toget(er#it( t(e re?uired attac(ments5 t(e employers(all #it((old t(e taxes prescri$ed under t(e<c(edule for _ero >xemption of t(e Re)isedWit((olding ax a$le. 6n case of failure to let(e +erticate of pdate of >xemption and of >mployer@s and >mployee@s 6nformation *B6RForm No. 2/0; toget(er #it( t(e

12%


attac(ments5 t(e employer s(all #it((old t(etaxes $ased on t(e reported personal

determination of t(e amount of taxes to $e #it((eld.



p pexemptions existing prior to t(e c(ange of status and #it(out re[ecting any c(ange. nyrefund or under#it((olding t(at s(all arisedue to t(e )iolations s(all $e co)ered $y t(epenalties prescri$ed in <ection &0 of t(e N6R+5

as amended.

National /nternal Re&enue Code SS%;*< 9 O0;B<

DPe!(o$al Ee)"%o$(. -

*1 6n General. - nless ot(er#ise pro)ided$y t(is +(apter5 t(e personal andadditional exemptions applica$le undert(is +(apter s(all $e determined inaccordance #it( t(e main pro)isions of t(is itle.

*2 >xemption +erticate. -*a W(en to File. - n or $efore t(e

date of commencement of employment #it( an employer5 t(eemployee s(all furnis( t(eemployer #it( a signed #it((oldingexemption certicate relating tot(e personal and additionalexemptions to #(ic( (e is entitled.

*$ +(ange of <tatus. - 6n case of c(ange of status of an employee asa result of #(ic( (e #ould $eentitled to a lesser or greateramount of exemption5 t(eemployee s(all5 #it(in ten *10days from suc( c(ange5 le #it(t(e employer a ne# #it((oldingexemption certicate re[ecting t(ec(ange.

*c se of +erticates. - (ecerticates led (ereunder s(all $eused $y t(e employer in t(e

*d Failure to Furnis( +erticate. -W(ere an employee5 in )iolation of t(is +(apter5 eit(er fails or refusesto le a #it((olding exemptioncerticate5 t(e employer s(all

#it((old t(e taxes prescri$edunder t(e sc(edule for Heroexemption of t(e #it((olding taxta$le determined pursuant to<u$section * (ereof.

B E)"loyee. - W(ere an employee fails orrefuses to le t(e #it((olding exemptioncerticate or #illfully supplies false orinaccurate information t(ereunder5 t(e taxot(er#ise re?uired to $e #it((eld $y t(eemployer s(all $e collected from (im

including penalties or additions to t(e taxfrom t(e due date of remittance until t(e dateof payment. n t(e ot(er (and5 excess taxes#it((eld made $y t(e employer due to:

*1 failure or refusal to le t(e #it((oldingexemption certicate4 or

*2 false and inaccurate information s(allnot $e refunded to t(e employee $uts(all $e forfeited in fa)or of t(eGo)ernment.

x------------------------------------x

&.; Basis of +omputation for Wit((olding ax

National /nternal Re&enue Code S%;<

E ?%--old$* o$ Ba(( o, A#e!a*e?a*e(. - (e +ommissioner may5 underrules and regulations promulgated $y t(e

12&




National /nternal Re&enue Code S% ;< 9 ;6< #ai)er may $e done any time during t(eyear.



+ H'(ba$d a$d ?,e. - W(en a(us$and and #ife eac( are recipients of #ages5 #(et(er from t(e same or fromdiKerent employers5 taxes to $e #it((elds(all $e determined on t(e follo#ing

$ases:*1 (e (us$and s(all $e deemed t(e

(ead of t(e family and proper claimantof t(e additional exemption in respectto any dependent c(ildren5 unless (eexplicitly #ai)es (is rig(t in fa)or of (is#ife in t(e #it((olding exemptioncerticate.

*2 axes s(all $e #it((eld from t(e #agesof t(e #ife in accordance #it( t(esc(edule for Hero exemption of t(e#it((olding tax ta$le prescri$ed in

<u$section *C*2*d (ereof.

GNo$!e(de$% Ale$(. - Wages paid tononresident alien indi)iduals engaged intrade or $usiness in t(e P(ilippines s(all$e su$ect to t(e pro)isions of t(is+(apter.

RR 0$O S$.%.D

SECTION 6.<=.8. H'(ba$d a$d ?,e. ]W(ere $ot( (us$and and #ife are eac(recipients of compensation eit(er from t(esame or diKerent employers5 taxes to $e#it((eld s(all $e determined on t(e follo#ing$asis:* (e (us$and s(all $e deemed t(e proper

claimant of t(e additional exemption inrespect to any dependent c(ildren5 unless(e explicitly #ai)es (is rig(t in fa)or of (is#ife in t(e application for registration or int(e #it((olding exemption certicate. (e

y*B 6n general5 taxes s(all $e #it((eld from

t(e #ages of t(e #ife in accordance #it(t(e sc(edule for a married person #it(outany ?ualied dependent.

RR 10$00O S$.%;$<;d<

d Le*e$d o, (y)bol( U (e sym$ols usedin t(e ne# #it((olding tax ta$le representst(e follo#ing:

_ U _ero exemption*a >mployee #it( multiple employers

simultaneously5 #it( respect tosecond5 t(ird5 etc.5 employer4 and

*$ >mployee #(o fails to le pplicationfor Registration *B6R Form No. 1%024

< U <ingle5 legally separated spouses #ido#

#ido#er4

=> U =arried employee #(o is notlegally

separated4

(e numerals *1-' aLxed to t(e statussym$ols I=>J and I<J represent t(e num$erof ?ualied legitimate5 illegitimate5 or legallyadopted c(ildren.>xemption - means t(e amount of exemptionin t(ousand pesos an employee is entitled toclaim as a deduction from gross compensationincome in accordance #it( t(e status andnum$er of ?ualied dependent c(ildren.

x------------------------------------x

&.A Payroll

11


National /nternal Re&enue Code S%O ;B<#it( respect to t(e compensation paid $y anyone employer. (us5 if an employee is paid a



BPay!oll Pe!od. - (e term Zpayroll periodZmeans a period for #(ic( payment of #ages is ordinarily made to t(e employee$y (is employer5 and t(e term

\miscellaneous payroll period\ means apayroll period ot(er t(an5 a daily5 #ee3ly5$i#ee3ly5 semi-mont(ly5 mont(ly5?uarterly5 semi-annual5 or annual period.

RR 0$O S$.%O.$

SECTION 6.<5.6. Pay!oll Pe!od. ] (eterm \payroll period\ means t(e period of ser)ices for #(ic( a payment of compensationis ordinarily made to an employee $y (isemployer. 6t is immaterial t(at t(e

compensation is not al#ays paid at regularinter)als.

>=P,>: if an employer ordinarily pays t(e#ee3ly #ages of (is employees at t(e end of t(e #ee35 $ut if for some reason a particularemployee recei)es payment of (is salaries fort(e past #ee3 in t(e middle of t(e current#ee3 and recei)es t(e remainder at t(e endof t(e same #ee35 t(e payroll period is stillt(e calendar #ee34 or if5 instead5 t(eemployee is sent on a t(ree */-#ee3 trip $y

(is employer and recei)es at t(e end of t(etrip a single compensation payment for t(ree*/-#ee3 ser)ices5 t(e payroll period is stillt(e calendar #ee35 and t(e compensationpayment s(all $e treated as t(oug( it #eret(ree */ separate #ee3ly compensationpayments.

For t(e purpose of determining t(e tax5 anemployee can (a)e $ut one payroll period

regular compensation for t(e #ee3ly payrolland in addition t(ereto is paid supplementalcompensation *for example taxa$le $onusesdetermined #it( respect to a diKerent period5t(e payroll period is t(e #ee3ly payroll period.

RR 0$O S$.%;B<;1<;as amended by RR 10$00O S<

*1 se of Wit((olding ax a$les. U 6n general5e)ery employer ma3ing payment of compensation s(all deduct and #it((oldfrom suc( compensation a tax determinedin accordance #it( t(e prescri$ed Re)isedWit((olding ax a$les *nnex I+J #(ic(s(all $e used starting Danuary 15 200%.

(ere are four *' #it((olding taxta$les prescri$ed in t(ese regulations5as follo#s:*a =ont(ly ax a$le U to $e used $y

employers using t(e mont(lypayroll period4

*$ <emi-=ont(ly ax a$le U to $eused $y employers using t(e semi-mont(ly payroll period4

*c Wee3ly ax a$le U to $e used $yemployers using t(e #ee3ly payrollperiod4

*d Caily ax a$leUto $e used $yemployers using t(e daily payrollperiod.

6f t(e compensation is paid ot(er t(andaily5 #ee3ly5 semi-mont(ly ormont(ly5 t(e tax to $e #it((eld s(all$e computed as follo#s:

12


*a nnually U use t(e annualiHedcomputation referred to in <ec.

*2 >mployees. - (e amount deductedand #it((eld under t(is +(apter during



2.A%*B*;*$ of t(ese Regulations4*$ Ouarterly and semi-annually U

di)ide t(e compensation $y t(ree*/ or six *" respecti)ely5 todetermine t(e a)erage mont(ly

compensation. se t(e mont(ly#it((olding tax ta$le to computet(e tax5 and t(e tax so computeds(all $e multiplied $y t(ree */ orsix *" accordingly.

For t(e year 200&5 (o#e)er5 $eing t(einitial year of implementation of R %;0'5t(ere s(all $e a transitory #it((olding taxta$le for t(e period from Duly " toCecem$er /15 200& *nnex ICJdetermined $y prorating t(e annual

personal and additional exemptions underR %;0' o)er a period of six mont(s. (us5 for indi)iduals5 regardless of personal status5 t(e prorated personalexemption is P2;50005 and for eac(?ualied dependent c(ild *OC+5 P125;00.

x------------------------------------x

&.& Refunds and ax +redits of axes Wit((eld from Wages

National /nternal Re&enue Code S% ;C< 9 ;K<

C Re,'$d( o! C!ed%(. -

*1 >mployer. - W(en t(ere (as $een ano)erpayment of tax under t(is <ection5refund or credit s(all $e made to t(eemployer only to t(e extent t(at t(eamount of suc( o)erpayment #as notdeducted and #it((eld (ereunder $yt(e employer.

any calendar year s(all $e allo#ed asa credit to t(e recipient of suc( incomeagainst t(e tax imposed under <ection2'* of t(is itle. Refunds and creditsin cases of excessi)e #it((olding s(all

$e granted under rules and regulationspromulgated $y t(e <ecretary of Finance5 upon recommendation of t(e+ommissioner.

ny excess of t(e taxes #it((eld o)ert(e tax due from t(e taxpayer s(all $ereturned or credited #it(in t(ree */mont(s from t(e fteent( *1;t( day of pril. Refunds or credits made aftersuc( time s(all earn interest at t(erate of six percent *"Q per annum5

starting after t(e lapse of t(e t(ree-mont( period to t(e date t(e refund of credit is made.

Refunds s(all $e made upon #arrantsdra#n $y t(e +ommissioner or $y (isduly aut(oriHed representati)e #it(outt(e necessity of counter-signature $yt(e +(airman5 +ommission on udit ort(e latterZs duly aut(oriHedrepresentati)e as an exception to t(ere?uirement prescri$ed $y <ection '%5

+(apter &5 <u$title B5 itle 1 of Boo3 of >xecuti)e rder No. 2%25 ot(er#ise3no#n as t(e dministrati)e +ode of 1%&A.

HKea!3E$d Ad0'(%)e$%. - n or $efore t(eend of t(e calendar year $ut prior to t(epayment of t(e compensation for t(e lastpayroll period5 t(e employer s(alldetermine t(e tax due from eac(

1


employee on taxa$le compensationincome for t(e entire taxa$le year in

d i ( < i 2 * (

dependents under <ection /;:Pro)ided5 (at a citiHen of t(e(ili i d li i di id l



accordance #it( <ection 2'*. (ediKerence $et#een t(e tax due from t(eemployee for t(e entire year and t(e sumof taxes #it((eld from Danuary toNo)em$er s(all eit(er $e #it((eld from

(is salary in Cecem$er of t(e currentcalendar year or refunded to t(e employeenot later t(an Danuary 2; of t(esucceeding year.

x------------------------------------x

&.% 6ndi)idual Returns

National /nternal Re&enue Code S@1;A<

A Re'!e)e$%(. -

*1 >xcept as pro)ided in paragrap( *2 of t(is <u$section5 t(e follo#ingindi)iduals are re?uired to le anincome tax return:*a >)ery Filipino citiHen residing in t(e

P(ilippines4*$ >)ery Filipino citiHen residing

outside t(e P(ilippines5 on (isincome from sources #it(in t(eP(ilippines4

*c >)ery alien residing in t(e

P(ilippines5 on income deri)ed fromsources #it(in t(e P(ilippines4 and

*d >)ery nonresident alien engaged intrade or $usiness or in t(e exerciseof profession in t(e P(ilippines.

*2 (e follo#ing indi)iduals s(all not $ere?uired to le an income tax return4*a n indi)idual #(ose gross income

does not exceed (is total personaland additional exemptions for

P(ilippines and any alien indi)idualengaged in $usiness or practice of profession #it(in t(e P(ilippines(all le an income tax return5regardless of t(e amount of gross

income4*$ n indi)idual #it( respect to pure

compensation income5 as denedin <ection /2 **15 deri)ed fromsources #it(in t(e P(ilippines5 t(eincome tax on #(ic( (as $eencorrectly #it((eld under t(epro)isions of <ection A% of t(is+ode: Pro)ided5 (at an indi)idualderi)ing compensationconcurrently from t#o or moreemployers at any time during t(e

taxa$le year s(all le an incometax return: Pro)ided5 furt(er5 (atan indi)idual #(ose compensationincome deri)ed from sources #it(int(e P(ilippines exceeds <ixtyt(ousand pesos *P"05000 s(allalso le an income tax return4

*c n indi)idual #(ose sole income(as $een su$ected to nal#it((olding tax pursuant to <ection;A* of t(is +ode4 and

*d n indi)idual #(o is exempt from

income tax pursuant to t(epro)isions of t(is +ode and ot(erla#s5 general or special.

*/ (e forgoing not#it(standing5 anyindi)idual not re?uired to le anincome tax return may ne)ert(eless $ere?uired to le an information returnpursuant to rules and regulationsprescri$ed $y t(e <ecretary of Finance5

1!


upon recommendation of t(e+ommissioner.

*' ( i t t ( ll $ l d i

t(e su$stituted ling of income tax returns $ysaid employees.



*' (e income tax return s(all $e led induplicate $y t(e follo#ing persons:*a resident citiHen - on (is income

from all sources4*$ nonresident citiHen - on (is

income deri)ed from sources #it(int(e P(ilippines4

*c resident alien - on (is incomederi)ed from sources #it(in t(eP(ilippines4 and

*d nonresident alien engaged intrade or $usiness in t(e P(ilippines- on (is income deri)ed fromsources #it(in t(e P(ilippines.

x------------------------------------x

&.10 <u$stituted Filing

RR 0$O S$.O.D;amended by RR 10$00O S<

SECTION 6.57.8. S'b(%%'%ed +l$* o, I$co)e Ta Re%'!$( by E)"loyee(Rece#$* P'!ely Co)"e$(a%o$ I$co)e.U 6ndi)idual taxpayers recei)ing purelycompensation income5 regardless of amount5from only one employer in t(e P(ilippines fort(e calendar year5 t(e income tax of #(ic(

(as $een #it((eld correctly $y t(e saidemployer *tax due e?uals tax #it((eld s(allnot $e re?uired to le B6R Form No. 1A00. 6nlieu of B6R Form No. 1A005 t(e nnual6nformation Return of 6ncome axes Wit((eldon +ompensation and Final Wit((olding axes*B6R Form No. 1"0'-+F *(ard copy led $yt(eir respecti)e employers5 duly stampedIrecei)edJ $y t(e B6R5 s(all $e tantamount to

(e follo#ing indi)iduals5 (o#e)er5 are not?ualied for su$stituted ling and t(erefore5still re?uired to le B6R Form No. 1A00 inaccordance #it( existing regulations:

* 6ndi)iduals deri)ing compensationconcurrently from t#o or more employersat anytime during t(e taxa$le year.

*B 6ndi)iduals #(ose purely compensationincome for t(e taxa$le year exceedsP"05000.

*+ =inimum #age earners includingemployees of t(e go)ernment of t(eP(ilippines5 or any political su$di)isions5agencies or instrumentalities5 #it( <alaryGrades 1 to / #(ose income #ere not

su$ected to #it((olding tax $ut su$ect toincome tax from Danuary 1 to Duly ;5 200&.

*C >mployees #(ose total compensationincome5 regardless of t(e amount5#(et(er from a single or se)eralemployers during t(e calendar year5 t(eincome tax of #(ic( (as not $een #it((eldcorrectly5 t(at is5 t(at t(e total #it((oldingtax does not e?ual t(e total tax due ontotal compensation income for t(e taxa$leyear.

*> 6n case of married indi)iduals #(ere one of

t(e spouses recei)ed compensationincome exceeding P"050005 a return s(all$e led to include t(e income of t(e ot(erspouse #(ose compensation is P"05000 orless.

*F Ini3iuals recei3ing a co'/ination o5 co'ensation an /usiness inco'e )'i6einco'e. 7his inclues a 'arrie ini3iualrecei3ing urely co'ensation inco'e whosesouse eri3es inco'e 5ro' /usiness.

1"


6n case of married indi)iduals #(o are stilli d t l t d i ti

(e return s(all $e led and t(e paymentd it(i t t *2; d f t(



re?uired to le returns under existingpro)isions of t(e la#5 i.e.5 in t(ose instancesnot co)ered $y t(e su$stituted ling of returns5 only one return for t(e taxa$le years(all $e led $y eit(er spouse to co)er t(e

income of t(e spouses5 #(ic( return s(all $esigned $y t(e (us$and and #ife5 unless it isp(ysically impossi$le to do so5 in #(ic( casesignature of one of t(e spouses #ould suLce.

>mployees not ?ualied for su$stituted ling$ut are re?uired to le t(e 6ncome ax Returns(all le t(e same not later t(an pril 1; of t(e year immediately follo#ing t(e taxa$leyear. Pro)ided5 t(at employees #it(pre)ioussuccessi)e employers #it(in t(etaxa$le year s(all furnis( t(eir ne# employer

#it( B6R Form No. 2/1" issued $y t(epre)ious employers.

x------------------------------------x

&.11 Filing of Returns for axes Wit((eld and Payment of axesWit((eld

National /nternal Re&enue Code SO1

SEC. 51. +l$* o, Re%'!$ a$d Pay)e$% o, Tae( ?%--eld. - >xcept as t(e

+ommissioner ot(er#ise permits5 taxesdeducted and #it((eld $y t(e employer on#ages of employees s(all $e co)ered $y areturn and paid to an aut(oriHed agent $an34+ollection gent5 or t(e duly aut(oriHed reasurer of t(e city or municipality #(ere t(eemployer (as (is legal residence or principalplace of $usiness5 or in case t(e employer is acorporation5 #(ere t(e principal oLce islocated.

made #it(in t#enty-)e *2; days from t(eclose of eac( calendar ?uarter: Pro)ided5(o#e)er5 (at t(e +ommissioner may5 #it(t(e appro)al of t(e <ecretary of Finance5re?uire t(e employers to pay or deposit t(e

taxes deducted and #it((eld at more fre?uentinter)als5 in cases #(ere suc( re?uirement isdeemed necessary to protect t(e interest of t(e Go)ernment.

(e taxes deducted and #it((eld $yemployers s(all $e (eld in a special fund intrust for t(e Go)ernment until t(e same arepaid to t(e said collecting oLcers.

RR 0$O S$.O1;amended by RR 001 SD<

SECTION 6.51. +l$* o, Re%'!$ a$dPay)e$% o, I$co)e Ta ?%--eld o$Co)"e$(a%o$ +o!) No. 1>1. ] >)eryperson re?uired to deduct and #it((old t(etax on compensation5 including largetaxpayers as determined $y t(e+ommissioner5 s(all ma3e a return and paysuc( tax on or $efore t(e 10t( day of t(emont( follo#ing t(e mont( in #(ic(#it((olding #as made to any aut(oriHedagent $an3 #it(in t(e Re)enue Cistrict Lce

*RC or in places #(ere t(ere are no agent$an3s5 to t(e Re)enue Cistrict Lcer of t(e+ity or =unicipality #(ere t(e #it((oldingagentemployer@s legal residence or place of $usiness or oLce is located4 pro)ided5(o#e)er5 t(at taxes #it((eld from t(e lastcompensation *Cecem$er for t(e calendaryear s(all $e paid not later t(an Danuary 1; of t(e succeeding year4 Pro)ided5 (o#e)er5 t(at#it( respect to taxpayers5 #(et(er large or

1#


non-large5 #(o a)ailed of t(e >FP<5 t(edeadline for electronically ling t(e aforesaid#it((olding tax return and paying t(e tax due

during t(e calendar year5 and t(e amountof tax deducted and #it((eld under t(is+(apter in respect of suc( #ages (e



#it((olding tax return and paying t(e tax duet(ereon )ia t(e >FP< s(all $e )e *; dayslater t(an t(e deadlines set a$o)e.

6f t(e person re?uired to #it((old and pay t(e

tax is a corporation5 t(e return s(all $e madein t(e name of t(e corporation and s(all $esigned and )eried $y t(e president5 )ice-president5 or aut(oriHed oLcers.

Wit( respect to any tax re?uired to $e#it((eld $y a duciary5 t(e returns s(all $emade in t(e name of t(e indi)idual5 estate5 ortrust for #(ic( suc( duciary acts5 and s(all$e signed and )eried $y suc( duciary. 6nt(e case of t#o or more oint duciaries t(ereturn s(all $e signed and )eried $y one of

suc( duciaries.

x------------------------------------x

&.12 Wit((olding <tatements and nnual 6nformation onReturns

National /nternal Re&enue Code SO

SEC. 57. S%a%e)e$%( a$d Re%'!$(. 3

* Re?uirements. - >)ery employer re?uired

to deduct and #it((old a tax s(all furnis(to eac( suc( employee in respect of (isemployment during t(e calendar year5 onor $efore Danuary t(irty-rst */1st of t(esucceeding year5 or if (is employment isterminated $efore t(e close of suc(calendar year5 on t(e same day of #(ic(t(e last payment of #ages is made5 a#ritten statement conrming t(e #agespaid $y t(e employer to suc( employee

+(apter in respect of suc( #ages. (estatement re?uired to $e furnis(ed $y t(is<ection in respect of any #age s(allcontain suc( ot(er information5 and s(all$e furnis(ed at suc( ot(er time and in

suc( form as t(e <ecretary of Finance5upon t(e recommendation of t(e+ommissioner5 may5 $y rules andregulation5 prescri$e.

*B nnual 6nformation Returns. - >)eryemployer re?uired to deduct and #it((oldt(e taxes in respect of t(e #ages of (isemployees s(all5 on or $efore Danuaryt(irty-rst */1st of t(e succeeding year5su$mit to t(e +ommissioner an annualinformation return containing a list of

employees5 t(e total amount of compensation income of eac( employee5t(e total amount of taxes #it((eldt(erefrom during t(e year5 accompanied$y copies of t(e statement referred to int(e preceding paragrap(5 and suc( ot(erinformation as may $e deemed necessary. (is return5 if made and led inaccordance #it( rules and regulationspromulgated $y t(e <ecretary of Finance5upon recommendation of t(e+ommissioner5 s(all $e suLcient

compliance #it( t(e re?uirements of <ection "& of t(is itle in respect of suc(#ages.

*+ >xtension of time. - (e +ommissioner5under suc( rules and regulations as may$e promulgated $y t(e <ecretary of Finance5 may grant to any employer areasona$le extension of time to furnis(

1$


and su$mit t(e statements and returnsre?uired under t(is <ection.

s(ift diKerential pay and (aHard pay recei)ed$y =W>s4 t(e amount of tax due4 t(e amountof tax #it((eld during t(e calendar year and



RR 0$O SS$.O.1 9 $.O.$;as amended by RR 10$00O S<

SECTION 6.57.1. E)"loyee( ?%--old$*

S%a%e)e$%( BIR +o!) No. 671. ] 6ngeneral5 e)ery employer or ot(er person #(ois re?uired to deduct and #it((old t(e tax oncompensation including fringe $enets gi)ento ran3 and le employees5 s(all furnis( e)eryemployee from #(o se compensation taxes(a)e $een #it((eld t(e +erticate of +ompensation Payment ax Wit((eld *B6RForm No. 2/1" on or $efore Danuary /1 of t(esucceeding calendar year5 or if employment isterminated $efore t(e close of suc( calendaryear5 on t(e day on #(ic( t(e last payment of

compensation is made. Failure to furnis( t(esame s(all $e a ground for t(e mandatoryaudit of payor@s income tax lia$ilities*including #it((olding tax upon )eriedcomplaint of t(e payee.

>mployers of =W>s are still re?uired to issueB6R Form No. 2/1" *Dune 200& >ncs )ersionto t(e =W>s on or $efore Danuary /1 of t(efollo#ing year. (e employer s(all furnis( eac( employee#it( t(e original and duplicate copies of B6R

Form No. 2/1" s(o#ing t(e name and addressof t(e employer4 employer@s 6N4 name andaddress of t(e employee4 employee@s 6N4amount of exemptions claimed amount of premium payments on (ealt( andor(ospitaliHation insurance not exceedingP25'00.005 if any4 t(e sum of compensationpaid including t(e non-taxa$le $enets4 t(eamount of statutory minimum #age recei)ed$y =W>s4 )ertime pay5 (oliday pay5 nig(t

of tax #it((eld during t(e calendar year andsuc( ot(er information as may $e re?uired. (e statement must $e signed $y $ot( t(eemployer or ot(er aut(oriHed oLcer and t(eemployee5 and s(all contain a #ritten

declaration t(at it is made under t(e penaltiesof perury. 6f t(e employer is t(e Go)ernmentof t(e P(ilippines5 its political su$di)ision5agency or instrumentality or go)ernment-o#ned or controlled corporation5 t(estatement s(all $e signed $y t(e dulydesignated oLcer or employee.

(e +erticate of +ompensation PaymentaxWit((eld *B6R Form No. 2/1" s(all conta in acertication to t(e eKect t(at t(e employer@sling of B6R Form No. 1"0'-+F s(all $e

considered as a su$stituted ling of t(eemployee@s income tax return to t(e extentt(at t(e amount of compensation and tax#it((eld appearing in B6R Form No. 1"0'+F asled #it( t(e B6R is consistent #it( t(ecorresponding amounts indicated in B6R FormNo. 2/1". 6t s(all $e signed $y $ot( t(eemployee and employer attesting to t(e factt(at t(e information stated t(erein (as $een)eried and is true and correct to t(e $est of t(eir 3no#ledge. 9o#e)er5 t(e #it((oldingagentsemployers are re?uired to retain

copies of t(e duly signed B6R Form No. 2/1"for a period of t(ree */ years as re?uiredunder t(e N6R+.

W(ere t(e employee is a =W> dened underR %;0' #(ose income is exempt fromincome tax and5 conse?uently5 from#it((olding tax5 B6R Form No. 2/1" s(all s(o#t(e sum of non-taxa$le <=W paid includingt(e non-taxa$le $enets suc( as (oliday pay5

1%

