BIR Ruling

September 29, 1973 Mr. Eduardo A. Rialph P. O. Box 670 Makati Commercial Center D-708 Makati, Rizal S i r : This refers to your letter dated August 16, 1973 requesting a ruling on whether the pension which, as represented, you received from the Procter & Gamble Philippines Manufacturing Corporation Pension Plan Fund when you resigned in April, 1973 from Procter & Gamble Philippine Manufacturing Corporation at the age of 35 and after 34 years in the service of the said corporation, is exempt from the payment of income tax under Presidential Decree No. 220. In reply, thereto, I have the honor to inform you that Presidential Decree No. 220 does not cover the retirement benefits or pensions of officials and employees of private firms in the Philippines which shall continue to be governed by Republic Act No. 4917 as amplified by Revenue Regulations No. 1-68. (Par. 2, Sec. 2, Rev. Regs. No. 6-73 dated July 10, 1973 implementing Presidential Decree No. 220) Pursuant to Republic Act No. 4917, the retirement benefits received by officials and employees who have been in the service of the same private firm for at least ten (10) years and who are not less than fifty years (50) of age at the time of retirement are exempt from all taxes provided that the retirement benefits are in accordance with a reasonable private benefit plan maintained by the employer. Under the final proviso of Section 1, Republic Act No. 4917, any amount received by an official or employee from his employer by reason of death, sickness or other physical disability or for any cause beyond the control of the official or employee is likewise exempt from income taxes regardless of age or length of service. Benefits paid under the said proviso are exempt from taxes whether or not the employer paying the benefits maintains a retirement benefit plan as envisaged by the said Act. In the light of the foregoing, and considering that your separation from the service of your employer is by voluntary resignation at the age of 35 years, and not by retirement on the actual retirement dates and age specified by the Rules and Regulations of the Procter & Gamble Philippine Manufacturing Corporation Pension Plan, the disqualification of which as a tax-exempt retirement benefit plan under Republic Act No. 4917 has been determined and approved by this Office on January 29, 1969, or by involuntary separation or separation for "any cause beyond the control of the employee", this Office is of the opinion as it hereby holds that the pension which you received from and/or under the Plan on account of such resignation is subject to income tax; and that the deduction and withholding of the income tax on such pension payments are legal and proper. cdtech Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."