Equity-based compensation paid to either rank-and-file and managerial/supervisory employees are subject to withholding tax on compensation

Equity-based compensation paid to either rank-and-file and managerial/supervisory employees are subject to withholding tax on compensation

(Revenue Regulations No. 13-2022, issued on October 07, 2022)

This Tax Alert is issued to inform all concerned on the income tax treatment of equity-based compensation received by grantee-employees.

Any kind of equity-based compensation, such as stock options, restricted share awards, stock appreciation rights (SARs), and restricted stock units, which may or may not pertain to the shares of stocks of the grantor itself, are considered taxable compensation subject to the withholding tax on compensation once exercised or availed of by the grantee-employees.

The above tax treatment is applicable regardless of the employment status of the grantee-employees, which could either be rank-and-file or occupying managerial/supervisory position.

The provision of Revenue Memorandum Circular 79-2014 and any regulations, rulings, orders, or circulars, or portions thereof which are inconsistent with the provisions of this Regulation are hereby revoked, repealed, or amended accordingly.

The Regulation shall take effect 15 days following its publication in Manila Times on October 14, 2022.