QuestionsQuestions (EXECUTIVE ORDER NO. 291)
EO 291 provides that monetized leave credits of government officials and employees remain tax-exempt from income tax and addresses conflicting BIR rulings.
The monetized leave credits of government officials and employees shall continue to be exempt from income tax.
EO 291 abrogated prior BIR rulings, including Section 2.78.1(A)(7), page 27 of Revenue Regulation No. 2-98 dated April 17, 1998, which subjected monetization of leave credits to income tax.
EO 291 cites Section 17, Article VII of the Constitution as the basis for abrogating previous rulings.
EO 291 states that BIR rulings created confusion among government bodies on whether monetized leave credits are subject to income tax and withholding tax, discouraging applications despite urgent/emergency needs.
EO 291 claims the BIR rulings conflict with the CSC intent that monetization of leave credits is tax-free, referenced as institutionalized in 1991 and affirmed via CSC Resolution No. 992630 dated December 2, 1999.
The EO references Memorandum Circular No. 31, s. 1991 and the Joint CSC-DBM Circular No. 2-97, s. of 1997, implementing the policy referenced to Joint CSC-DBM and DBM/CSC circulars.
Because BIR rulings allegedly made monetization appear taxable (and potentially subject to withholding tax), employees hesitated despite urgent/emergency needs.
It enjoins all heads of departments and agencies and others concerned to strictly implement the Order.
Immediately, as stated in Section 4 (Effectivity).
EO 291 discusses confusion on income tax and withholding tax in the recitals, but the operative rule in Section 1 specifically exempts monetized leave credits from income tax.
EO 291 mentions Republic Act No. 8424 (the Tax Reform Act of 1997) and states that the abrogated BIR rulings were inconsistent with it and with the intention of the benefit.
It nullifies the cited BIR issuances’ applicability and supersedes them, so government agencies should follow the EO’s tax-exempt directive instead.
It is the specific provision of BIR Revenue Regulation No. 2-98 that EO 291 identifies as the latest ruling conflicting with the tax-free policy.
Agencies must adjust payroll/tax treatment of monetized leave credits, ensure no income tax is withheld/assessed consistent with the tax exemption, and apply the EO prospectively and per its abrogation directive.