January 16, 2008

BIR RULING [DA-013-08]

DA023-06
Metrobank Card Corporation
6778 Ayala Avenue
Makati City
Attention: Atty. Aileen Paulette Saavedra-De Jesus
Gentlemen :
This refers to your letter dated October 11, 2007 stating that Metrobank Card
Corporation (MCC) is a corporation organized and existing under and by virtue of the
laws of the Philippines; that MCC is engaged in the business of issuing credit cards to
the general public; that to promote the efficiency of its employees in order for MCC
to deliver the desired services to its credit cardholders, there are some units of MCC
requiring 24/7 operation; that to man this operational set-up, certain personnel,
amongst them, customer service agents (CSAs) and fraud personnel and some
backroom employees of MCC are made to work at designated hours, including night
time; that in some instances, these employees may have to work overtime even after
their shift ends; that MCC, in recognition of the added risk that its employees take on
to commute to and from work during the graveyard/night shift as well as those who
extend their working hours during weekdays, weekends, or during holidays, provides
them with Overtime/Transportation Allowance of and a Duty Allowance on
Night/Graveyard Shift, to wit:
cACEHI

(a) Transportation Allowance are granted as follows:

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Officer:

P200.00/day on a weekday after 9 pm

P250.00/day on a weekend
P300.00/day on holidays

Rank-and-File

P100.00/day on a weekday after 9 pm

P200.00/day after midnight

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

employee rendered 4 hours of work and
P200.00/day if 8 hours
P250.00/day on a holiday for 8 hours work and
P150.00 for 4 hours if work is rendered on a holiday

(b) The Night Shift Allowance are as follows:

Officer:

P300.00/day

Rank-and-file:

After 9 pm P500.00 on a weekday and

P100.00 on a weekend or holiday
After midnight P100.00 on a weekday and
P150.00 on a weekend or holiday

that MCC believes that these allowances are meant not only to promote the efficiency
and well being, as well as the safety of its employees, but are also necessary to enable
these employees to come to work on time without any untoward incident taking into
account the lateness of the hour and the prevailing security situation in the country;
that in the conduct of its card business, it is necessary for MCC to promote and
maintain good relations with merchants and retail establishments relative to its card
acquiring business; that accordingly, MCC sends its employees to regularly visit
merchants in different parts of Metro Manila or the country, to check whether the
Point-of-Sale terminal/equipment they are using are in top condition, and to handle
other concerns; that MCC likewise attends to the needs of the direct sales
agencies/agents who promote its card products; that the employees assigned to
conduct fieldwork for purposes of discharging their function are entitled to a meal
allowance on fieldwork of P100/day or P110.00/day within and outside of Metro
Manila, respectively; and that the employees who are sent to locations beyond Metro
Manila for purposes of carrying the business operations of MCC are entitled to an
Outstation or Out-of-Town Allowance as follows:
ACIDSc

i)

Rank-and-File:

Daily local allowance of P300.00 given when the employee is assigned outside of
Metro Manila
Daily foreign allowance of USD50.00 for Europe and Japan; USD40.00 for the USA
and Asian countries

ii)
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Officers:

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President
AVP up
Managers

P1,000.00/day
P800.00/day
P600.00/day

Foreign
President
FVP
VP
AVP
Managers

Trip
USD120-150/day
USD95-105/day
USD90-100/day
USD75-85/day
USD65-75/day

Based on the foregoing representations, you now request for confirmation of

your opinion that the above-mentioned benefits for the convenience and benefits of
MCC, if required by the nature of, or necessary to the trade or business of MCC, are
not subject to the fringe benefit tax pursuant to Section 2.33 (C) of Revenue
Regulations No. 3-98, as amended; and that since the aforesaid benefits are
pre-computed on a daily basis and are paid to the employees while they are on
assignment or duty, they are not subject to the requirements of substantiation and to
any withholding tax pursuant to Revenue Regulations No. 2-98, as amended.
ASDCaI

In reply thereto, please be informed that Section 2.33 (C) of Revenue

Regulations No. 3-98, as amended, provides
"(C)
Fringe Benefits Not Subject to Fringe Benefit Tax. In
general, the fringe benefits tax shall not be imposed on the following fringe
benefits:
xxx

xxx

xxx

(5) If the grant of fringe benefits to the employee is required by the

nature of, or necessary to the trade, business or profession of the employer; or
(6) If the grant of fringe benefits to the employee is for the convenience
of the employer."
DCcSHE

Corollarily, Section 2.78.1 (A) (6) (b) of Revenue Regulations No. 8-2000
provides that
"(6) Fixed or variable transportation, representation and other
allowances.
xxx
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xxx

xxx

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(b)

Any amount paid specifically, either as advances or reimbursements for

traveling, representation and other bona fide ordinary and necessary
expenses incurred or reasonably expected to be incurred by the
employee in the performance of his duties are not compensation subject
to withholding, if the following conditions are satisfied:
(i)

It is paid for ordinary and necessary traveling and

representation or entertainment expenses paid or
incurred by the employee in the pursuit of the trade,
business or profession; and

(ii)

The employee is required to account/liquidate for the

foregoing expenses in accordance with the specific
requirements of substantiation for each category of
expenses pursuant to Section 34 of the Code. The
excess of actual expenses over advances made shall
constitute taxable income if such amount is not required
to
the
employer.
Reasonable
amounts
of
reimbursements/advances
for
traveling
and
entertainment expenses which are pre-computed on a
daily basis and are paid to an employee while he is on an
assignment or duty need not be subject to the
requirements of substantiation and to withholding."

In stressing the rationale of the above-mentioned principles, this Office

elucidated on the matter in BIR Ruling No. DA350-04 dated June 25, 2004, as
follows:
CEaDAc

"Transportation allowance being given by your subsidiaries, Parlance

Systems, Inc. and Vocative Systems, Inc. to its customer service representatives
are not compensation subject to income tax and consequently to withholding tax
on wages in accordance with Revenue Regulations No. 2-98, as amended.
Moreover, since the transportation allowance is pre-computed on a daily basis
and are paid to the employee while on an assignment or duty, the said
transportation allowance is not subject to the requirements of substantiation and
to withholding pursuant to Revenue Regulations No. 2-98, as amended."

The above-cited ruling was later reiterated in BIR Ruling No. DA-023-06 dated
January 27, 2006, where it was held that
"If the Outstation Allowance is clearly required by the nature of or
necessary to the trade or business of the employer, the grant of such Outstation
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Allowance is not subject to the fringe benefits tax prescribed in Section 33(A) of
the said Code. Consequently, the Outstation Allowance, not being part of the
compensation income of the employee, is not subject to income tax and
consequently to withholding tax. By the same token, the Outstation Allowance
which may be incurred or expected to be incurred by the aforesaid employee in
the performance of his duties cannot be considered as part of compensation
subject to withholding tax even if the employee fails to account/liquidate the
same considering that said expense is pre-computed on a daily basis and is paid
to an employee while he is on an assignment or duty."
HDTcEI

IN VIEW OF THE FOREGOING, this Office hereby confirms your opinion

that the above-mentioned benefits which are for the convenience of MCC and are
required by the nature of, or necessary to the trade or business of MCC are not subject
to the fringe benefits tax pursuant to Section 2.33 (C) of Revenue Regulations No.
3-98, as amended. Moreover, since the said benefits are pre-computed on a daily basis
and are paid to the employees, while they are on assignment or duty, they are not
subject to the requirements of substantiation and therefore not subject to income tax
and to withholding tax.
This ruling is being issued on the basis of the foregoing facts as represented.
However, if upon investigation, it will be disclosed that the facts are different, then
this ruling shall be considered null and void.
CcADHI

Very truly yours,

(SGD.) JAMES H. ROLDAN

Assistant Commissioner
Legal Service
Bureau of Internal Revenue

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