March 29, 2004

BIR RULING [DA-146-04]

RR 8-2000; 10-2000
081-03; 019-2002

Sodexho Pass, Inc.

Unit 2001 The Orient Square
Emerald Avenue, Ortigas Center
Pasig City

Attention: Mr. Frans Tiebout

General Manager

Gentlemen :

This refers to your letter dated March 2, 2004 stating hereunder, viz:

1) MEAL AND FOOD ALLOWANCE

In BIR Ruling No. 023-02 dated June 21, 2002, issued to Sodexho Pass
International (Sodexho for brevity), the BIR ruled that the meal and food benefits
granted through Sodexho meal and food voucher, although not intended to be used
for overtime work may be considered as de minimis benefits and therefore exempt
from income tax, provided that such meal and food benefits shall not exceed 25%
of the daily minimum wage.

In rendering such opinion, the BIR points to the fact that the Revenue
Regulations No. 8-2000 and 10-2000 are merely illustrative and non-exclusive in
the enumeration of what constitute de minimis fringe benefits. Any facilities or
privileges furnished or offered by an employer to his employees that are of
relatively small value and offered or furnished by the employer merely as a means
of promoting the health, goodwill, contentment or efficiency of employees are
considered de minimis benefits

You are of the belief that the meal and food voucher passed the test of
convenience on the part of the employer and the promotion of health, goodwill,
contentment or efficiency of the employees. The voucher system ensures that the
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 meal/food allowance given to employees is actually used to purchase food/meals
and it provides documentary support.

2) SODEXHO MEDICAL PASS

Sodexho plans to expand its business and venture into the issuance of
Sodexho Medical Pass or Health Pass, similar to Sodexho Meal Pass. The Health
Pass is a voucher system allowing the employees to pay within the year for their
medical expenses (consultations and medicines) at accredited medical health
services.

Under Section 1(A)(3)(e) of RR No. 10-2000, actual yearly medical benefits

not exceeding P10,000.00 per annum shall be considered as de minimis benefits
not subject to income tax as well as withholding tax on compensation income of
both managerial and rank and file employees. Moreover, BIR Ruling No. 019-2002
dated May 9, 2002 provides that the following conditions must concur:

i. The amount given to the employee shall be for his own medical
expenses for a given taxable year;

ii. The amount actually given and actually spent for medical
reasons shall not exceed P10,000 in any given calendar year.
The term "actual" connotes something that exist in fact or
existing in reality as distinct of contrasted with something that
is potential, possible or a mere expectancy.

iii. The employee must fully substantiate with official receipts in

his name the medical allowance so granted on or before the
annualization of withholding taxes in any given calendar year.

In view thereof, you would like to request confirmation on the following:

a. Whether the above ruling confines the tax exemption only to

meal voucher/passes or also to include meal cash allowances;

b. Whether the official receipts presented by the employer will be

considered as substantial documentation to determine that said
allowances are actually for meals/foods;

c. Whether Sodexho Health Pass may be constituted as de minimis

benefits exempt from income tax as well as withholding tax on
compensation income; and

d. Whether the process and the documentation of Sodexho Health

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 Pass will qualify for the substantiation requirements of medical
expenses.

On the basis of the foregoing, we proceed to respond to your specific

concerns:

1. On Meal and Food Allowance

Tax exemption on Food and Meal Allowance through meal vouchers/passes

under BIR Ruling No. 023-2000 is confined only to meal vouchers/passes because
it was your specific query on a particular matter, which is the said meal
vouchers/passes. However, pursuant to Revenue Regulations No. 3-98 as amended
by Revenue Regulations No. 8-2000 and 10-2000, meal cash allowances may be
tax-exempt, subject to the standards set for de minimis thresholds for fringe
benefits under the said Regulations, and to the conditions set for the benefits to be
exempt pursuant to the tests of convenience of the employer and the promotion of
health, goodwill, contentment, or efficiency of the employees under Section
2.78.1(A)(2) and (3) of Revenue Regulations No. 2-98, as amended by Revenue
Regulations No. 8-2000 and 10-2000.

Further, meal cash allowances must be substantiated by official receipts or

adequate records, e.g. cash disbursement voucher. Generally, this Office only
accepts the original copy of the receipt/s, which a taxpayer presents to substantiate
deductible expense. (BIR Ruling No., 027-01, dated June 20, 2001)

Accordingly, for purposes of considering meal cash allowance as valid

deductible expense on the part of Sodexho Pass, Inc. official receipts or other
adequate records must be submitted.

2. On Sodexho Medical Pass

Medical Pass of employees worth not exceeding P10,000.00 per annum is

considered de minimis benefits and therefore not considered as compensation
income/wages and is not subject to either fringe benefits tax, income tax or
withholding tax on compensation (Revenue Regulations No. 2-98, as amended).
Medical Pass may be tax-exempt subject to the standards set for de minimis
thresholds for fringe benefits under Revenue Regulations No. 8-2000 and 10-2000,
and further, to the conditions set for the benefits to be exempt pursuant to the tests
of convenience of the employer and the promotion of health, goodwill,
contentment, or efficiency of the employees under Section 2.78.1(A)(2) and (3) of
Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 8-2000
and 10-2000. AHCcET

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 The amount of de minimis benefits conforming to the ceiling herein
prescribed shall not be considered in determining the P30,000.00 ceiling of "other
benefits" provided under Section 32(B)(7)(e) of the Tax Code of 1997. However,
if the employer pays more than the ceiling prescribed by the Regulations, the
excess shall be taxable to the employee receiving the benefits only if such excess is
beyond the P30,000.00 ceiling (BIR Ruling No. DA-081-03 dated March 17,
2003).

To be considered as de minimis, the employee must fully substantiate with

official receipts in his name or adequate records of medical pass so granted, on or
before the annualization of withholding taxes in any given calendar year (BIR
Ruling No. 019-2002 dated May 9, 2002).

Accordingly, for purposes of considering medical pass as valid deductible

expense on the part of Sodexho Pass, Inc. official receipts or other adequate
records must be submitted.

This ruling is being issued on the basis of the foregoing facts as

represented. However, if upon investigation it will be disclosed that the facts are
different, then this ruling shall be considered null and void.

Very truly yours,

(SGD.) JOSE MARIO C. BUÑAG

Deputy Commissioner
Legal and Inspection Group
Bureau of Internal Revenue

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