BIR Ruling No. 337-2022

REPUBLICOF THE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE

Quezon City.

RA No.11494; RMC No.120-2020 RR No. 29-2020 O 32 Person to Contact: Chief, Law Division Tel Nos.926-55-36 /927-09-63

JUN 3 0 2022

Eliza E. Guevarra

Gentlemen:

This refers to your request for confirmation of your opinion that the retirement benefits received by frontliners, whether in the private or public sector, is exempt from tax pursuant to Republic Act No.11494,otherwise known as the Bayanihan to Recover as One Act.

In reply, Section 5 of RA No. 11494 states that retirenvent benefits received by officials and employees of private firms shall be exempt from income tax, to wit:

benefits received by officials and employees of private firms, whether "SECTION 5. Exemption from Tax of Retirement Benefits. -- Retirement

individual or corporate,from June 5,2020 until December 31,2020 shall be excluded from gross income and shall be exempt from taxation: Provided, That any re-employment of such official or emplovee.n the same firm, within the succeeding twelve (12)-month period, shall be considered as proof of

In addition to the payment of appropriate taxes, any person who willfully non-retirement and shall subject the benefits received to appropriate taxes. evades or defeats any imposable tax under this section shall be criminally liable and penalized under Section 255 of Republic Act No. 8424, as amended.

In connection therewith, the aforequoted provision was implemented by Revenue Regulations(RR) No.29-2020 whiclireads

excluded from gross income gnd shall not be subjext to income tax: "SECTION 3. Tax Exemption. -- The following income payments shall be

further, that any re-employment of such official or emplovee in the same Regulations 19-2020, within the succeeding twelve (12)-month period shall A. Retirement benefits receivel by officials and emglovees of private firms. provided that the amount reccived is in accordance with a retirement plan duly-registered with the Bureau of Internal Re senue (BIR). Provided firm and its related parties as discussed under whether individual or corporate,from June 5,2020 to December 31,2020 330 Section 4 of Revenue

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be considered as proof of non-retirement. Note, however, that the abovementioned conditions do not cover the retirement benefits of employees under Section 2.78.1 (B) (1) of Revenue Regulatior:s 02-98, as amended.

If the re-employment happens within calendar year 2020, the employer shal? include the said retirement benefits in the gross income of the concerned official or emplovee for 2020. However, if the re-einployment will occur in 2021 and within the twelve-month period, the concerned emplovee shall pay the taxes due on the retirement benefits received within thirty (30) days from date of re-employment, or on the due date for the payment of the second installment payment of 2020 income tax, whichever comes later, without penalties. " (Underscoring and emphasis ours)

The exemption of the retirement benefits from income tax under RA No. 11494 was further clarified in Revenue Memorandum Circular (RMC) No. 120-2020, viz

"Q1. Employee A, fifty (50) years of age and with eight (8) years of service in Company B retired on June 15, 2020 and received the retirement benefits on August 31, 2020.Compcny B has a registered retirement plan with the BIR and the retirement benefits received by said emplovee is based on that plan. Are the retirement benefits received exempt from income tax?

Al. Yes, although the employee did not meet one of the conditions particularly on the length of service under the approved employees retirement benefits plan, the received retirement benefits is considered exempt from income tax since the same is bused on the registered retirement plan with the B(R, and the emplovee retired and received the retirement benefits during the covered period of June 5 to December 31 2020 under the Republic Act No. 11494 or the Bavanihan to Recover as One Act."(Underscoring and emphasis ours)

Based on the above-mentioned provisions, retirernent benefits received shall be excluded from the computation of gross income and exempted from income tax if the following requisites concur:

1. He or she must be an employee or official of a private firm, whether 2 The date of retirement and receipt of benefits thereof must be from June 5. individual or corporate;

3. The amount received must be in accordance with a retirement plan duly A The employee must not be re-employed by the same firm or its related registered with the Bureau of Internal Revenue (BIR); and 2020 to December 31, 2020):

parties within the next twelve 12 months. Otherwise, the retirement benefits shall be subject to income tax.

2020 further elucidates that only the amount covered by the registered retirement plan will be of Qualification as a Reasonable Employees' Retirement Benefit Plan. Also, RMC No.120 exempt from income tax. Thus, any amount in excess of what is within the retirement plan shall The retirement plan is duly registered with the BIR when it has been issued a Certificate

be taxable.

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RA No. 11494 and RR No.29-2020 is clear on who shall enjoy the tax exemption of

11494. It is a cardinal rule in statutory construction that when the law is clear and free from the retirement benefits received.The law expressly provides that the employee or official must be employed in a private firm,whether individual or corporate.Hence,government officials or any doubt or ambiguity, there is no room for construction or interpretation. There is only room for application. employees will not enjoy the tax exemption of retirement benefits granted under RA No

income and shall not be subject to incoine tax pursuant to RA No. 114941: classified as public/private health workers and human resourses for health under Section 2 of RR No.29-2020,regardless of priva:e or public employment, shall be excluded from gross However, please note that the following income payments received by frontliners

1. COVID-19 special risk allowance given to public and private health 2 Actual hazard duty pay received by human resouces for health3; and workers2:

3. Compensation paid to private and public health workers who have contracted COVID-19 in lire of duty or who dies while fighting COVID 19.

RA No. 11494 shall only apply to employees and officials who are employed in private firms, whether individual or corporate. In view of the foregoing, the exemption from income tax of retirement benefits under

Please be guided accordingly.

Very truly yours,

10uan

Commissioner of Internal Revenue CAESARR.DULAY *0 "052198

K-

supplement the current health workforce. Public/Private Health Workers persons employed in all hospitals, sanitaria, heaith infirmaries, health cen ters, rural health units, barangay health subdivisions with original charters and shall include medical, allied health professional, administrative and 3 Human Resources for Health (HRH) - Any person temporarily hired oremployed to complement or stations,clinics and other health-related establisiments, owned and operated by the Government or its political support personnel employed regardless of their employment status. 1 Section 5 (B) to (D) - all persons vho are engaged in health and health-related work, and all PAGE 3 of 3