Law Summary
Taxation of AFP Benefits and Allowances
- Armed Forces of the Philippines (AFP) personnel generally have their remunerations, including fringe benefits, considered as taxable compensation income subject to withholding tax.
- Exceptions include allowances for quarters, clothing, and subsistence, which are exempt from income tax under Revenue Memorandum Circular No. 15-87.
- Other monetary or non-monetary benefits such as hazard pay and longevity pay are taxable.
Statutory Basis for PNP Tax Exemption
- Section 71 of R.A. 6975 explicitly grants PNP uniformed personnel the entitlement to longevity pay and other allowances.
- These benefits enjoy an express exemption from attachment, levy, execution, or any tax as per Section 77 of the same Act.
- This establishes a clear and special statutory tax exemption for PNP benefits not applicable to other government personnel.
Tax Status of AFP Personnel Benefits
- Military personnel receive similar benefits to the PNP but only the quarters, clothing, and subsistence allowances are tax-exempt.
- Other benefits including hazard pay, cost of living allowance (COLA), Additional Compensation Allowance (ACA), longevity pay, and loyalty pay are included in taxable income.
- These tax provisions for AFP are governed by paragraph 2, Section 2 of Revenue Regulations No. 12-96 and Revenue Memorandum Circular No. 15-87.
Tax Code Provisions Affecting Military and Government Personnel
- Paragraph (F), Section 28(b) of the Tax Code, as amended by R.A. 7833, governs the taxability of benefits such as hazard pay, COLA, ACA, and longevity pay across government and private sector employees.
- Benefits tax-exempt for AFP personnel are limited compared to PNP due to the absence of a special statute granting broader exemptions.
Clarification of Tax Exemption Claims
- PNP members are entitled to claim tax exemption on quarters allowance, clothing allowance, cost of living allowance, hazard pay, and longevity pay under R.A. 6975.
- AFP personnel's tax exemption claims are limited to quarters, clothing, and subsistence allowances only.
- All other benefits received by AFP personnel are taxable and subject to withholding taxes.
Summary of Legal Guidance
- PNP benefits enjoy a unique, specific tax exemption under a special law (R.A. 6975).
- AFP benefits are generally taxable except for a few specified allowances exempted under revenue regulations.
- The distinction is important for compliance and tax withholding purposes.
- Benefits exempt from tax cannot be used in determining if "other benefits" exceed the P12,000 threshold for tax purposes.