October 10, 2003

BIR RULING [DA-357-03]

RR 2-98
DA 617-99

Bayer Philippines, Inc.

Bayer House
Canlubang Industrial Estate
Calamba, Laguna

Attention: Ms. Marie Espana

Human Resource Department

Gentlemen :

This refers to your letter dated July 4, 2003 stating that your company grants to
its female employees, maternity leave benefits of 60 days and 78 days for normal
delivery and/or caesarian, respectively pursuant to R.A. No. 1161, otherwise known
as the SSS Law, as amended by R.A. No. 7322; that the company pays 100% of the
employee's basic salary while she is on leave, consequently, SSS reimburses the
company for a certain portion of the salary paid to the employee during her absence
based on the employee's SSS contributions; and that the remaining portion of the
salary paid to the employee not reimbursed by the SSS is the amount you want to
confirm if subjected to withholding tax. Thus,
Daily Rate x 60 days (for normal delivery)
Amount of salary lost due to maternity leave = Pxxx

Less: Maternity benefits received from

The Social Security System xxx
——

Difference = additional maternity benefits xxx

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 In reply thereto, please be informed that this Office had already occasioned to
rule on the matter when it said in BIR Ruling No. DA617-99 dated November 3, 1999
that —

" . . . facilities or privileges (such as entertainment, medical services, or

so called courtesy discounts on purchases) furnished or offered by an employer
to his employees, generally, are not considered as compensation subject to
withholding tax if such facilities or privileges are of relatively small value and are
offered or furnished by the employer merely as a means of promoting the health,
goodwill, contentment or efficiency of his employees pursuant to Revenue
Regulations No. 2-98, as amended by Revenue Regulations No. 3-98,
implementing Section 32(B)(7)(e)(iv) of the Tax Code of 1997. ECDaAc

"Such being the case, the additional maternity benefits being granted to
the rank and file female employees of Mercury Group of Companies, Inc. and its
subsidiary companies are not considered compensation income/wages.
Accordingly, the same are not subject to withholding tax prescribed by Section
79 in relation to Section 24(A) both of the Tax Code of 1997 since the
allowances are relatively of small value and offered by the employer to promote
the health and efficiency of its employees. (BIR Ruling Nos. 370-92; DA303-99)

Considering that the additional maternity benefits to be given to the female

employees of Bayer Philippines, Inc. are in all fours similar to the above-cited cases,
this Office is of the opinion as it hereby holds that the aforesaid benefits are not
subject to income tax and consequently to withholding tax prescribed in Section 79 of
the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98, as
amended.

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. HSTCcD

Very truly yours,

(SGD.) JOSE MARIO C. BUÑAG

Deputy Commissioner
Legal & Inspection Group
Bureau of Internal Revenue

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