BIR Ruling

August 9, 1968 Mr. Vicente B. Chuidian Chuidian Law Office 8th Floor, JMT Bldg. 6764 Ayala Avenue, Makati, Rizal S i r : This refers to your letter dated July 16, 1968 requesting information on a query stated as follows: "We respectfully seek from your good Office a clarification of the true meaning of Republic Act 4917, entitled "An act providing that retirement benefits of employees of private firms shall not be subject to attachment, levy, execution, or any tax whatsoever." We wish to know whether the exemption granted to the recipient of a pension, extends to employees who were separated prior to the enactment of the law, provided the other requisites of Republic Act 4917 have been met. This is of importance to our clients Winthrop-Stearns, Inc. and Sterling Products International, Inc., two concerns who inquire about the necessity of withholding taxes from the regular pension paid to previously retired employees." In reply, I have the honor to inform you that employees who retired prior to the enactment of Republic Act No. 4917, are subject to income tax and consequently, to the withholding tax on the retirement benefits they received or will received before or after June 17, 1967 which is the date of the effectivity of said Act. This is so because as a rule, laws have prospective application, unless the contrary is expressly provided. (Filipinas Compania de Seguros vs. C.I.R., G.R. No. L-14880, April 29, 1960). This rule applies with greater force in the case of Republic Act No. 4917, considering that Section 2 thereof, expressly provides that "this Act shall take effect upon its approval." Moreover, in order that retiring employees who meet the qualifications called for by the Act may avail of the tax exemption benefit under Republic Act No. 4917, the employer-company must submit to this Office a copy of its plan and establish the reasonableness of said plan in accordance with the requirement of Republic Act No. 4917. lexlib Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue