BIR Ruling

July 5, 1974 Mr. Joseph Thomas Edgecock 10 Wakat Street Sta. Mesa Heights La Loma, Quezon City S i r : This refers to your letter dated May 24, 1974 requesting information as to the taxability of the separation benefit in the total amount of P37,866.67 which, as represented, was received by you under the 1952 Luzon Stevedoring Corporation Retirement Plan when your service with the Luzon Stevedoring Corporation (LUSTEVECO) was terminated on January 31, 1970 at the age of 57 years and after 23 years and 8 months in the service of said corporation. In reply thereto, I have the honor to inform you that pursuant to Republic Act No. 4917, the retirement benefit 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 (50) years 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. However, 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, B.I.R. Form No. 17.60 duly filled out and accompanied by a written program constituting the plan and the trust instrument. 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 taxes regardless of age or length of service. The aforementioned final proviso of Section 1, Republic Act No. 4917 is not applicable to the instant case notwithstanding the letter of LUSTEVECO dated January 21, 1970 stating that you were separated from its service "due to the severe drop in the volume of business brought about by circumstances in the country beyond the control of this Company's management". The records show that your employer has a Plan in accordance with which, payment of your separation benefit was made; and that such involuntary separation benefits are predetermined benefits forming part of the 1952 LUSTEVECO Plan which has not been submitted to this Office for determination of qualification under Republic Act No. 4917. In view thereof, this Office is of the opinion as it hereby holds that the total amount of P37,866.67 which you received from and/or under the 1952 LUSTEVECO Plan on account of your separation from the service of LUSTEVECO is subject to income tax; that the deduction and withholding of the income tax on such separation pay are legal and proper; and that the refund thereof cannot be granted. 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."