By Rey G. Panaligan
From now on, benefits received by government employees such as allowances, bonuses, and compensation for services are subject to withholding tax, the Supreme Court has ruled.
In a unanimous full court decision released yesterday, the SC said “all income received by an employee from his or her employer are presumptively taxable and subject to withholding and the government, as an employer, has the duty to withhold and remit the proper taxes due thereon.”
The SC also ruled that its decision should “be applied prospectively” and “an employee who claims exemption from withholding taxes has the burden to prove the factual and legal bases of the claim in the proper administrative and judicial proceedings.”
At the same time, the SC said, “The fiscal autonomy enjoyed by the Judiciary, Ombudsman, and Constitutional Commissions does not grant immunity or exemption from the common burden of paying taxes imposed by law.”
With the ruling, the SC affirmed the validity of the regulations issued by the Bureau of Internal Revenue which imposed withholding tax on the erstwhile non-taxable fringe benefits of government employees.
The SC Public Information Office said the SC affirmed the validity of Sections 3, 4, and 7 of BIR Revenue Memorandum Order No. 23-2014 which classified income allowances, bonuses, compensation for services granted to government employees and other benefits, except for the 13th month pay, in excess of P30,000, and the loyalty pay as taxable compensation.
Under RMO 23-2014 which took effect on July 7, 2014, all fringe benefits received by employees and officers of government are subject to 30 to 32 percent tax.
“In upholding Sections III and IV, the Court ruled that no additional tax is imposed as the two sections merely mirror the relevant provisions of the National Internal Revenue Code of 1997 on withholding tax on compensation income,” the PIO said in a briefer.
But the SC declared Section 6 of RMO 23-2014 “only where it names the Governor, City Mayor, Municipal Mayor, Barangay Captain, and Heads of Office in government agencies, government-owned or controlled corporations, and other government offices, as persons required to withhold and remit withholding taxes as null and void.”
