Summary
RR No. 13-2022 prescribes the guidelines, procedures and requirements for the proper Income Tax treatment of equity based compensation of any kind.
Key points
- Basis in the NIRC. Section 32(A) of the NIRC defines gross income to include compensation for services in whatever form paid. Section 2.78.1 of RR No. 2-98 says compensation paid in a medium other than money is measured at fair market value.
- Equity grants are compensation. Equity grants under the grantor’s equity plans give grantee-employees a realized benefit for services rendered. Once exercised or availed of, they are compensation taxed under Section 32 of the NIRC and RR No. 2-98.
- No distinction by rank. The rule applies whatever the employment status of the grantee, whether rank-and-file, supervisory or managerial.
Who is affected
- Employees receiving equity based compensation
- Grantors of equity plans
Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.
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