BIR Ruling No. 601-2020

REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF FINANCE

BUREAU OF INTERNAL REVENUE

Quezon City

Republic Act No.7641

Republic Act No. 4917; Section 32 B6a of the NIRC of 1997; as amended; BIR Ruling No. 231-2016; BIR Ruling No. 1151-18.

CT-0601-2020

MANUEL HINOLAN 0CT 2 0 2020

Vista Verde Executive Village, Imelda Ave. Cainta, Rizal, Philippines 22 Loja St., Phase 7

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or not the retirement benefits that you will receive from Flour Daniel, Inc. --Philippines are exempted from tax. It is represented that you have been a regular employee of Flour Daniel, Inc. -Philippines since January 5, 2012 and that you are to retire from said employment by January 2020. Further, it is your opinion that Republic Act (RA) No. 7641 has superseded RA No. 4917 thus, effectively decreasing the required years of service of the employee to This refers to your letter dated January 6, 2020 requesting for clarification on whether

avail of the aforesaid tax exemption from ten (10) years to five (5) years.

We reply as follows:

years and is not less than fifty (50) years of age at the time of his retirement, to wit: Private Firms Shall Not Be Subject to Attachment, Levy, Execution, or Any Tax subject to any tax when the employer has a "reasonable retirement benefit plan", and that the retiring official or employee has been in the service of the same employer for at least ten (10) Whatsoever", provides that retirement benefits of employees of private firms shall not be RA No. 4917 entitled, "An Act Providing that Retirement Benefits of Employees of

benefits received by officials and employees of private firms, whether individual Section 1. Any provision of law to the contrary notwithstanding, the retirement

the employer shall be exempt from all taxes and shall not be liable to attachment. or corporate, in accordance with a reasonable private benefit plan maintained by garnishment, levy or seizure by or under any legal or equitable process

private benefit plan or that arising from liability imposed in a criminal whatsoever except to pay a debt of the official or employee concerned to the

action: Provided, That the retiring official or employee has been in the service of the same employer for at least ten (10) years and is not less than fifty years of under this Act shall be availed of by an official or employee only once: Provided, age at the time of his retirement: Provided, further, That the benefits granted

finally, That in case of separation of an official or employee from the service of

likewise be exempt as hereinabove provided. (Emphasis supplied) beyond the control of the said official or employee, any amount received by him or. by his heirs from the employer as a consequence of such separation shall the employer due to death, sickness or other physical disability or for any cause

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On the other hand. RA No. 7641 entitled.An Act Amending Article 287 of Presidential Decree No. 442. as Amended, Otherwise Known as the Labor Code of the Philippines. by Providing for Retirement Pav to Oualified Private Sector Employees in the Absence Of Any Retirement Plan in the Establishment ", states:

Section 1. Article 287 of Presidential Decree No. 442, as amended, otherwise

known as the Labor Code of the Philippines, is hereby amended to read as

follows:

"Art. 287. -- Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or: other applicable employment contract.

"In' .case of retirement, the emplovee shall be entitled to 'receive 'such retirement benefits as he may have earned under existing laws and any

collective bargaining agreement and other agreements: Provided, however,

other agreements shall not be less than those provided herein. That an employee's retirement benefits under any collective.bargaining and

whole year. (Emphasis supplied) benefits of emplovees in the establishment, an emplovee upon reaching the (5) vears in the said establishment, mav retire and shall be entitled to retirement pav eauivalent to at least one-half (1/2) month salary for every "In the absence of a retirement plan or agreement providing for retirement age of sixty (60) vears or more, but not bevond sixtv-five (65) vears which is hereby declared the compulsory retirement age, who has served at least five vear of service. a fraction of at least six (6) months being considered as one

Code of 1997, as amended, states that: Further, please be informed that Section 32(B)(6)(a) of the National Internal Revenue

"Section 32.Gross Income.

included in gross income and shall be exempt from taxation under this Title: B Exclusions from Gross Income. - The following items shall not be

XXX XXX XXX

6 Retirement Benefits, Pensions, Gratuities, etc.

(a Retirement benefits received under R.A. 7641 and those received

shall be exempt from taxation." (Emphasis supplied) Provided, that the retiring official or employee has been in the service of the same employer for at least ten (10) years and is not less than fifty (50) years of by officials and employees of private firms, whether individual or corporate, in accordance with a reasonable private benefit plan maintained by the employer: age at the time of his retirement: : . ., shall not be included in gross income and

been determined by the Bureau of Internal Revenue (BIR) as a "reasonable retirement benefit the service of the same private firm for at least ten (10) years; and (2) he is atleast fifty (50) years old at the time of retirement. However, if the company does not maintain a retirement plan", the retirement benefits that will be received by the employees shall be exempt from income tax, provided that the two (2) conditions are met, viz.:(1 the employee had been in Based on the above, if the company maintains a private retirement :plan which has

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plan approved by the BIR as a "reasonable retirement benefit plan," the provisions of RA No. 7641 shall apply:

retirement benefit plan with Certificate of Tax'Exemption No. 049-2019 as determined by the Philippines are not exempt from tax since you have failed to meet the'requirement of having been employed in said company for at least ten (10) years. BIR, the retirement benefits you are to receive from Fluor Daniel Philippines, Inc. Corisidering that Fluor Daniel Philippines, Inc. - Philippines has a reasonable

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

Thank you and we hope we have been of assistance.

Very truly yours,

iaraw

CAESAR R. DULAY Commissioner of Internal Revenue

036952

K1-FR-20-0018 i K-1-RPT