Funds considered to be taxable investments
By: Ronnel W. Domingo
Philippine Daily Inquirer
1:04 am | Wednesday, November 16th, 2011
Contributions to pension, housing and health funds amounting to more
than required by law are subject to income and withholding tax effective
last July 1, according to the Bureau of Internal Revenue.
The BIR has issued Revenue Memorandum Circular No. 53-2011, which
affirms and clarifies an earlier ruling.
The BIR directive states that voluntary contributions to the Social
Security System, Government Service Insurance System, Home Mutual
Development Fund (Pag-IBIG Fund) and the Philippine Health Insurance
Corp. (PhilHealth) are subject to tax.
The BIR said that such contributions are considered investments and are
thus taxable, adding that it would no longer entertain any requests for
tax exemption on these contributions.
"It has been observed that the grant of income tax exemption to SSS,
GSIS, (PhilHealth) and Pag-ibig contributions in excess of the mandatory
contributions is being abused," Internal Revenue Commissioner Kim S.
Henares said in an earlier circular.
By law, for example, a Pag-IBIG member is required to contribute P100 a
month while a PhilHealth member must put in one percent of one's salary
for those earning up to P1,500 a month or 2 percent for those who earn more.
On top of that, Pag-IBIG's new program allows members to contribute
voluntarily an additional P1,000 a month, PhilHealth also has a similar
program.
These additional "contributions can be gleaned as a form of investment,"
Henares said. "The money being invested by the employees in these
programs is not being taxed."
Also, employers who are mandated to withhold taxes of their employees
find it difficult to comply since voluntary contributions may not always
pass through them, she added.
To further clear the air, the BIR decided to revoke four rulings it
issued earlier.
These directives—Ruling No. 002-99, DA-184-04, DA569-04, and
DA-08706—exclude the subject contributions from a taxpayer's gross
income. In effect, the four earlier rulings virtually exempted such
contributions from income tax.
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