The following are inclusions to gross income:
1. COMPENSATION INCOME - income arising from employer-employee relationship.
The term being used to call a
... [Show More] compensation for services rendered as employee does not matter.
It may be called salary, wage, allowance, honorarium, emolument but its taxability remains the same.
For as long as the income is derived for services rendered under employer - employee relationship,
such is considered as compensation income.
The following compensation income are taxable in full:
A. Compensation paid in money
B. Compensation paid in kind - basis shall be the fair market value of the asset received.
C. Living quarters and meal allowance - Exempted if furnished for the convenience of the employer.
Ex. Mr. AA is project engineer and the company has a construction in the City of Sipalay.
Mr. AA is living in Bacolod City. If Mr. AA is given a living quarter and meal allowance for his new
assignment. In this instance, the living quarter and meal allowance is not taxable because they are
furnished for the convenience of the employer.
D. Fixed and variable representation and travel allowance - they are taxable in full if these allowances
are part of the salary of the employee given on a periodic basis. In other words, if these allowance
are part of the compensation package of the employee, then they are taxable in full. The following
are exceptions:
A. Representation and travel allowances received by government employees holding
position equivalent to salary grade 24 and above as well as those received by elected officials.
B. Representation and travel allowances given to an employee in pursuit of the business
activity of the employer are not taxable if the following conditions are satisfied:
1. Representation and travel allowances are given for the advancement of the business
of the employer and
2. The same shall be liquidated by the employee to the employer.
Ex. 1. Mr. CC is an employee of ABC Corporation, a domestic corporation. His salary includes
the following: Basic pay - P20,000; Representation allowance - 5,000 and travel allowance of P3,000.
The entire compensation income of Mr. CC is taxable.
Ex. 2 Mr. DD is a manager of ABC Corporation, a domestic corporation. His salary includes [Show Less]