New BIR Ruling on Additional Government Premium Contributions

Commissioner Kim S. Jacinto Henares recently revoked four (4) BIR Rulings exempting the premiums and contributions paid to Pag-ibig, GSIS and SSS from the Income Tax. The revocation of BIR Ruling Nos. 002-99 (dated January 12, 1999), DA-184-04 (dated April 6, 2004), DA-569-04 (dated November 10, 2004) and DA-087-06 (dated  March 6, 2006) was implemented through the issuance of Revenue Memorandum Circular No.27-2011 last July 1.

The said revoked rulings exclude from the gross income of taxpayers their contributions to Pag-ibig, GSIS, SSS, Life Insurance, Pre-Need Plan in excess of the mandatory monthly contribution; GSIS Optional Insurance Premium, GSIS Educational Plan Premium, GSIS Memorial Plan Premium, GSIS Unlimited Optional Insurance Premium. This, in effects, exempt said premiums and contributions from the Income Tax. In the Circular, it was explained that the grant of Income Tax exemption to SSS, GSIS, PHIC and Pag-ibig contributions cover only the mandatory/ compulsory contributions of the concerned employees. Thus, voluntary contributions in excess of the law allows to these institutions are not excludible from the gross income of the taxpayer and hence not exempt from Income Tax.

for example: Employee A Total Contribution for the month = P500.00 , Deduction should be:

• Pag-ibig Non Taxable contribution = P100.00
• Pag-ibig Employer Share = P100.00
• Pag-ibig Taxable contribution = P400.00

ACLT, for its part, started deploying patches since September for free  to its clients under software maintenance agreement and hopes to complete the assistance necessary to adjust the transactions of those employees contributing more to their Pag-IBIG or SSS funds before the year ends.