Question & AnswerQ&A (BIR REVENUE MEMORANDUM CIRCULAR NO. 12-97)
Republic Act No. 6975 provides the exemption from tax of certain benefits granted to members of the Philippine National Police.
Benefits such as longevity pay, subsistence allowance, clothing allowance, cost of living allowance, hazard pay, and all other allowances provided by existing laws are exempt from tax under RA 6975.
The maximum longevity pay shall not exceed fifty percent (50%) of the basic pay, at a rate of 10% of their basic monthly salaries for every five years of service.
Yes, all remunerations for services of AFP personnel are generally included in taxable compensation income subject to withholding tax, except for allowances for quarters, clothing, and subsistence.
Allowances for quarters, clothing, and subsistence are exempt from income tax for AFP personnel, pursuant to Revenue Memorandum Circular No. 15-87.
Section 77 of RA 6975 states that all benefits granted under the Act, including those received from the Government Service Insurance System, are exempt from attachment, levy, execution, or any tax.
BIR Ruling No. 120-96 ruled that all benefits granted under Section 71 of RA 6975 to PNP members are exempt from tax.
BIR Ruling No. 143-96 confirms that fringe benefits of AFP personnel, except quarters, clothing, and subsistence allowances, are subject to income tax.
Longevity pay, hazard pay, and other allowances are exempt from tax for PNP members under RA 6975, but are taxable for AFP personnel except for quarters, clothing, and subsistence allowances.
Taxation of AFP personnel benefits is governed by paragraph 2, Section 2 of Revenue Regulations No. 12-96, Revenue Memorandum Circular No. 15-87, and Section 28(b) paragraph (F) of the Tax Code as amended by RA 7833.