Tax Laws

RMC 65-2012

BIR has issued several rulings exempting from income tax the assessments charges
collected by Condos from its members on the ground that the collection of assoc dues are
merely held in trust used for admin expenses in implementing the purposes of the Condo
project.
- a condo could not really realize any gain or profit as a result of its receipt.
- Exempted from VAT since a condo does not sell barter exchange nor lease goods or
property but merely implements admin of required services

Issue: Taxability of assoc dues, membership fees, other assessments/ charges collected by
a condo corporation from its members, tenants

Liable for income tax and VAT

-assoc dues, membership fees, other assessments form part of the gross income of the latter
subject to VAT since they constitute income payment or compensation for beneficial services
it provides
-sec 105: any person regardless of whether or not person is engaged in nonstock non profit
organization is liable for VAT
as affirmed in the case of CIR v CA- even a non-stock, non-profit organization or government
entity
- it is immaterial whether the primary purpose of a corporation indicates it receives
payments for services rendered on a reimbursement-on-cost basis only…

Under TRAIN law: now exempt from VAT

RA 304

Section 1.

The employees of the government shall be entitled to their salaries.:

Computed from the day of the occupation of each province or city of the Japanese

- those who died before the liberation : up to the day they of their death or when they
were last seen alive.
- Those who survived: up to the liberation of each province

Sec. 2. Treasurer of the Ph shall prepare certificates of indebtedness:

provided that the face value of such certificate of indebtedness shall not exceed (1)
obligations subsisting at the time of the approval of this Act for which the applicant may
directly be liable to the Government or to any of its branches or instrumentalities, or the
corporations owned or controlled by the Government, or to any citizen of the Philippines, or
to any association or corporation organized under the laws of the Philippines, who may be
willing to accept the same for such settlement;
(2) his taxes, and
(3) government hospital bills of the applicant:

Provided, finally, That if certificates of indebtedness have been issued to an officer or

employee, his back pay at the end of ten years from the date of the approval of this Act shall
be equal to the amount due him under the provisions of this Act minus the full and total face
value of the certificates of indebtedness issued to him in the interim. Failure to file the
application within the time herein provided for will, forfeit whatever right there may be
to any back salary or wage which otherwise should have been due the applicant.

Sec. 3. The total of the back pay the right to which may by application be established, shall
computed at the rate of salary, emolument, fee, per diem, compensation or wage subsisting
on January 1, 1942 – for offices in MM.

For other provinces: on the occupation by the enemy

Sec. 4. At the end of each fiscal year, the National Government shall be reimbursed by the
province, city, municipality, the University of the Philippines, or the corporation owned or
controlled by the Government, whichever is concerned, for

Sec. 5. The salaries or wages or certificates of indebtedness herein provided, shall be

exempt from attachment or levy, except for the payment of taxes or obligations

Sec. 6. In case of the death of an officer or employee entitled to the benefits of this Act, his
legitimate heir or heirs or the legitimate assignee or endorsee of his certificate or certificates
of indebtedness shall succeed to the rights

Sec. 7. Advances granted shall be deducted from payment of back pay

Sec. 8. A sinking fund is hereby created under the custody of the National Treasurer who
shall invest it to earn not less than five per centum per annum with either the Philippine
National Bank, the Rehabilitation Finance Corporation, the Government Service Insurance
System, or any other banking or investment institution under the control of the National
Government.

BIR Ruling 142-99, 050-90

INCOME TAX; Payment of Separation Assistance Plan under R.A. 8291 - Pursuant to
Section 32(B)(6)(f) of the Tax Code of 1997, benefits from the GSIS under Republic Act
No. 8291, including retirement gratuity received by government officials and
employees shall not be included in gross income and shall be exempt from income
tax. For officials and employees of the Philippine Tourism Authority (PTA) who are already
qualified to avail of the optional and/or compulsory retirement under Republic Act No. 8291,
the payment of the Separation Assistance Plan benefits shall be considered as part of their
retirement gratuity and therefore exempt from the payment of income tax pursuant to Section
32(B)(6)(f) of the Tax Code of 1997.

However, for official/employees of the PTA who are not yet qualified to avail of the optional
and/or compulsory retirement and who want to avail of the Separation Assistance Plan by
resigning from their position, the benefits that they will receive under the Plan shall be
considered as part of their compensation income which are subject to income tax and
consequently to the withholding tax on wages under Section 79, Chapter XIII, Tittle II of the
Tax Code of 1997. (BIR Ruling No. 142-99 dated September 13, 1999)
EO 37

Sec. 10. Section 29 of the National Internal Revenue Code, as amended, is hereby further
amended to read as follows:

"Sec. 29. Gross Income. (a) General definition. Gross income means all income from
whatever source derived, including (but not limited to) the following items:

(b) Exclusions from gross income. The following items shall not be included in gross income
and shall be exempt from taxation under this Title:

(1) Life insurance. The proceeds of life insurance policies paid to the heirs of beneficiaries
upon the death of the insured, whether in a single sum or otherwise, but if such amounts are
held by the insurer under an agreement to pay interest thereon, the interest payments shall
be included in gross income.

(2) Amount received by insured as return of premium. The amount received by the insured,
as a return of premiums paid by him under life insurance, endowment, or annuity contracts,
either during the term or at the maturity of the term mentioned in the contract or upon
surrender of the contract.

(3) Gifts, bequest, and devises. The value of property acquired by gift, bequest, devise, or
descent; but the income from such property shall be included in gross income.

(4) Interest on Government securities. Interest upon the obligations of the Government of the
Republic of the Philippines or any political subdivisions thereof, but in the case of such
obligations issued after the approval of this Code, only to the extent provided in the act
authorizing the issue thereof.

(5) Compensation for injuries of sickness. Amounts received, through Accident or Health
Insurance or under Workmen's Compensation Acts, as compensation for professional
injuries or sickness, plus the amounts of any damages whether by suit or agreement on
account of such injuries or sickness.

(6) Income exempt under treaty. Income of any kind, to the extent required by any treaty
obligation binding upon the Government of the Philippines.

(7) Retirement benefits, pensions, gratuities, etc.

(A) Retirement benefits received by officials and employees of private firms, whether
individual or corporate, in accordance with a reasonable private benefit plan maintained by
the employer: Provided, That the retiring official or employee has been in the service of the
same employer for at least 10 years and is not less than 50 years of age at the time of his
retirement: Provided, further, That the benefits granted under this subparagraph shall be
available of by an official or employee only once. For purposes of this subsection, the
term 'reasonable private benefit plan' means a pension, gratuity, stock bonus or profit-
sharing plan maintained by an employer for the benefit of some or all of his officials or
employees, wherein contributions are made by such employer for officials or employees, or
both, for the purpose of distributing to such officials and employees the earnings and
principal of the fund thus accumulated, and wherein it is provided in said plan that at no time
 shall any part of the corpus or income of the fund be used for, or delivered to, any purpose
other than for the exclusive benefit of the said officials and employees.

(B) Any amount received by an official or employee or by his heirs from the employer as a
consequence of separation of such official or employee from the service of the employer due
to death, sickness or other physical disability or of any cause beyond the control of the said
official or employee.

(C) The provisions of any existing law to the contrary notwithstanding, social security
benefits, retirement gratuities, pensions and other similar benefits received by resident or
nonresident citizens of the Philippines or aliens who come to reside permanently in the
Philippines from foreign government agencies and other institutions, private or public.

(D) Payments of benefits due or to become due to any person residing in the Philippines
under the laws of the United States administered by the United States Veterans
Administration.

(E) Payments of benefits made under the Social Security Act of 1954, as amended.

(F) Benefits received from the GSIS and the retirement gratuity received by Government
officials and employees.

De Minimis benefits

1. Monetized unused vacation leave credits of employees not exceeding ten (10) days during the
year; (RR No. 5-2011)
2. Monetized value of vacation and sick leave credits paid to government officials and employees;
(RR No. 5-2011)
3. Medical cash allowance to dependents of employees, not exceeding P750 per employee per
semester or P125 per month; (RR No. 5-2011)
4. Rice subsidy of P1,500 or one (1) sack of 50 kg. rice per month amounting to not more than
P1,500; (RR No. 5-2011)
5. Uniform and Clothing allowance not exceeding P5,000 per annum; (RR No. 8-2012)
6. Actual medical assistance, e.g. medical allowance to cover medical and healthcare needs, annual
medical/executive check-up, maternity assistance, and routine consultations, not exceeding
P10,000.00 per annum; (RR No. 5-2011)
7. Laundry allowance not exceeding P300 per month; (RR No. 5-2011)
8. Employees achievement awards, e.g., for length of service or safety achievement, which must be
in the form of a tangible personal property other than cash or gift certificate, with an annual
monetary value not exceeding P10,000 received by the employee under an established written
plan which does not discriminate in favor of highly paid employees; (RR No. 5-2011)
9. Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per
employee per annum; (RR No. 5-2011)
10. Daily meal allowance for overtime work and night/graveyard shift not exceeding twenty-five
percent (25%) of the basic minimum wage on a per region basis; (RR No. 5-2011)
11. Benefits received by an employee by virtue of a collective bargaining agreement (CBA) and
productivity incentive schemes provided that the total monetary value received from both CBA
and productivity incentive schemes combined do not exceed P10,000.00 per employee per
taxable year. (RR No 1-2015)
APPLICATION OF THE “DE MINIMIS” CONCEPT

An employer who give a monthly rice subsidy to its employees are allowed only P1,500.00
monthly allowance per employee to be considered as “de minimis” as listed above. If the
employer granted more than this amount, the excess might be included as taxable compensation
income. The limitation stated in the above list are very important. Any excess on the limit will be
taxable and, therefore, be subjected to the withholding tax. It is in the case when the employee
is a rank-and-file employee, that the benefits be subjected to the withholding tax and the normal
income tax rate. However, if the employee is a managerial or supervisory employee, it will be
subjected to the 32% fringe benefit tax. But before you consider it being taxable under normal
income tax rate or fringe benefit tax, you have to consider first the 13th month pay, bonuses
plus the “excess of the de minimis” benefits received by the employee and compare it to the limit
of P82,000 (RR No. 3-2015 dated March 9, 2015). If the excess benefits, bonuses, and the 13th
month pay exceeds P82,000 limit, that’s the time it is taxable as stated above.