RMC No. 46-2013 — Clarifies the taxability of benefits under Collective Negotiations Agreement granted to government employees’ organizations duly approved/accredited by the Civil Service Commission

Making the Public Know BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU QF INTERNAL #EV RECORDS MGT DIVIS RECEIVE JjN 2.6 20131 1:50*PM M

May 26, 2013

REVENUE MEMORANDUM CIRCULAR NO. 4(0 - 20/3

SUBJECT Clarification on the Taxability of Benefits under Collective Negotiations

Approved/Accredited by the Civil Service Commission (CSC) Agreement (CNA) Granted to Government Employees' Organizations Duly

T O All Internal Revenue Officials. Employees and Others Concerned

organizations duly approved/accredited by the Civil Service Commission (CSC) through CNA. This Circular is issued to clarify the taxability of the benefits granted to government employees

BACKGROUND

organize of government employees by creating a Public Sector Labor-Management Council (PSLMC) while Executive Order No. 135:dated December 27, 2005 authorized the grant of CNA incentives to Executive Order No. 180 dated June l, 1987 provides guidelines for the exercise of the right to

2006-1 dated February 1, 2006. employees in Government Agencies. Such grant was affirmed by the DBM through Budget Circular No.

CLARIFICATION

Code of 1997. The ruling reads in part: 2009 that incentives arising from CNA qualify as "other benefits" under Section 32(B)(7)(e) of the Tax The Bureau had occasion to rule in BIR Ruling No. [DA-(ECB-023) 642-09] dated November 4,

from income tax and conseguently from the withholding tax. If the value exceeds the P30,000 ceiling. then the excess of the "other benefits" and the thirteenth month pay is considered as part of compensation subject to income tax and conseguently to the withholding tax" benefits". Thus, the vaiue of the "other benefits" when added to the thirteenth month pay must not exceed the threshold of P30,000 in order that it muy be exempt 2006-1 dated February 1, 2006) shows that the CNA incentive qualifies as "other : x x x A reading of the aforementioned Circular (DBM Circular No.

taxable to the employee, whether rank and file or supervisory. CNA benefits, when added to the 13" month pay and other benefits, shall not exceed the threshold of P30,000 [CNA + (13the month pay + other benefits) P30,000.00)]. Any excess in the threshold shall be 32(B)(7)(e) of the Tax Code of 1997. It is exempt from income tax and withholding tax provided that, the Based on the foregoing, the CNA incentive is included in the "other benefits" under Section

publicity as possible. All concerned revenue officials and employees are hereby enjoined to give this Circular as wide a

Commissioherfof Internal Revenue KIM S. YTO-HENARES

J-2/jnb 016495 4