BIR Ruling No. 286-2016

BUREAU OFINTERNALREVENUE REPUBLICOFT/E PHILIPPINES DEPARTMENT OF FINANCE Quezon City

Sec.32(B6a).1997 NIRC BIR Ruling No.297-2012

#286-2016 6-272016

L18 B14 Banker's Village Mr.Virgelio S.de Mesa Gitnang Bayan, San Mateo, Rizal

Sir:

account of your retirement upon reaching the age of sixty (60) years old on May 17, 2013. income tax on your retirement benefits to be received from Atlanta Industries, Inc. (Atlanta) on This refers to your letter dated May 28, 2014 requesting in effect, for exemption from

upon reaching 60 years of age and rendering 34.13 years of service in the said company. that based on the Certification dated May 26, 2014 submitted by Atlanta, it is shown that Mr Receiving Section; and that Mr. Virgelio S. de Mesa will be retiring from Atlanta on May 17, 2013 Atlanta since April 1, 1979, occupying the position of Toolkeeper under Central Toolroom Virgelio S.de Mesa with Tax Identification No.(TIN) Documents submitted disclose that Mr. Virgelio S. de Mesa was born on May 17, 1953; has been employed with

to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a but not beyond sixty-five (65) years which is declared the compulsory retirement age, who has served at least five (5) years in the service of the same employer, may retire and shall be entitled employees in the establishment, an employee upon reaching the age of sixty(60) years or more fraction of at least six (6) months being considered as one whole year. the said Act, in the absence of a retirement plan or agreement providing for retirement benefits of as amended. retirement benefits received under Republic Act No.7641 shall not be included in the gross income of the retiring employee and therefore not forming part of his taxable income. Under In reply,please be informed that pursuant to Section 32(B)6)(a) of the Tax Code of 1997

he will be reaching the age of sixty (60) and rendering at least five (5) years of service in the company, the retirement benefits he will receive pursuant to R.A. 7641 are not subject to income tax and consequently to the withholding tax imposed under Section 79, Chapter XIII, Title II of Based on the foregoing and since at the time of retirement of the above-named employee.

the Tax Code of 1997. (BIR Ruling No. 163-2011 dated May 23, 2011)

i.e., commutation and payment of monetized unused vacation leave credits not exceeding ten (10) days during the year are not subject to income tax and consequently to the withholding tax. Moreover, pursuant to Section 2.78.1 (A) (7) of RR 2-98, as amended, the terminal pay.

Conversely, the cash equivalent of vacation leave exceeding ten (10) days is subject to tax. However, this same principle cannot apply to SICK ieave credits since an employee must actually

go on sick leave to be able to avail of said leave credits.

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Mr. Virgelio S. de Mesa Page 2 of 2

salaries and the payment of the 13th month pay and other benefits in excess of the Php82,000.00 threshold under Section 2.78.1 (A)(3)(a) and (A)(7) of RR 2-98, as amended. (BIR Ruling No. 555-12 dated September 6,2012 It is understood that this exemption does not include the payment to the employee of his

upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered as null and void. This ruling is being issued on the basis of the foregoing facts as represented. However, if

Very truly yours,

KIM S.JACINTO-HENARES

\102(atlanta2) K- Commissioner of Internal Revenue 042392

JUN 2 4 2016

1 As amended by Revenue Regulations No. 3-2015 dated March 13, 2015