QuestionsQuestions (BIR REVENUE MEMORANDUM CIRCULAR NO. 12-97)
To clarify the BIR rulings on the tax exemption of certain benefits enjoyed by uniformed members of the Philippine National Police (PNP) under R.A. No. 6975 and to explain which benefits of Armed Forces of the Philippines (AFP) personnel are taxable or exempt.
Sections 71 and 77 of R.A. No. 6975 (as referenced in the text), particularly Section 71 on longevity pay and allowances and the exemption from attachment and taxes clause.
Longevity pay is 10% of the uniformed personnel’s basic monthly salary for every five (5) years of service, reckoned from the date of original appointment in the AFP or police/fire/jail or allied services prior to the integration of the PC and INP; totality cannot exceed 50% of basic pay.
Yes. The RMC states that all benefits granted by the Act, including benefits from the Government Service Insurance System, are exempt from attachment, levy, execution, or any tax of whatever nature, as explicitly stated in Section 71.
Subsistence allowance, quarters allowance, clothing allowance, cost of living allowance (COLA), hazard pay, and all other allowances as provided by existing laws.
No. The BIR ruled that all benefits under Section 71 of R.A. No. 6975 (including longevity pay and the enumerated allowances such as subsistence, clothing, COLA, hazard pay, and other allowances) are exempt from tax pursuant to Section 77 and the explicit exemption language in Section 71.
It held that AFP remunerations for services are generally included in taxable compensation income subject to withholding tax, including fringe benefits whether monetary or non-monetary, such as longevity pay, hazard pay, and all kinds of allowances.
Allowances for quarters, clothing, and subsistence are treated as exempt from income tax, as provided under Revenue Memorandum Circular No. 15-87 (cited in the text).
No. For PNP, the RMC emphasizes that exemption for the enumerated benefits (including quarters, clothing, COLA, hazard pay, longevity pay) is provided in R.A. No. 6975. For AFP, the claim for tax exemption is limited to quarters, clothing, and subsistence allowances.
For AFP personnel, hazard pay, COLA, longevity pay, and other allowances (other than quarters, clothing, and subsistence) are generally included in taxable compensation income subject to withholding tax.
It states that the taxability of the benefits mentioned (e.g., hazard pay, COLA, ACA, longevity pay and loyalty pay) is clearly provided by the Tax Code, and that these benefits should not be included for purposes of determining whether the “other benefits” exceeds ₱12,000.00.
Paragraph (F), Section 28(b) of the Tax Code, as amended by R.A. No. 7833.
Because benefits like hazard pay, COLA, ACA, longevity pay, and loyalty pay are generally taxable under the Tax Code as amended, while the tax exemption of certain PNP benefits is specifically granted by a special law—R.A. No. 6975.
AFP personnel’s claim for tax exemption is limited to quarters, clothing and subsistence allowances; for the rest of their benefits, they form part of taxable compensation subject to withholding tax.
It supports the legal principle that specific statutory exemptions (R.A. No. 6975 for PNP) prevail over general tax rules under the Tax Code (R.A. No. 7833 amendments), meaning exemption applies only to those benefits expressly covered by the special law.