BIR Ruling

September 29, 1969 The Managing Director Twentieth Century-Fox Philippines, Inc. Dee C. Chuan Building 627-637 Rizal Avenue Manila S i r : This is in connection with the letter of this Office to you dated January 22, 1969 wherein it was held that the retirement pay you give to your employees are exempt from income tax notwithstanding the fact that no fund is being maintained by you. prcd Please be informed that this Office, after a re-examination of the law found that the ruling contained in our aforesaid letter is not in conformity with the provisions thereof. Under the provisions of Republic Act No. 4917, it is necessary, among others, that for a retirement plan to qualify thereunder, the Plan must be duly funded. We have tried to be liberal in considering that the severance of your employees from the service on account of old age may be considered as involuntary separation. For this reason we held that any gratuity that you give them at the time their separation from the service of your corporation is exempt from income tax. However, after re-examination, we found that the ruling in question does not conform with the intent and purpose of the law. Inasmuch as no fund is being maintained by your corporation for such purposes and there being no written program actually established by you and which are communicated to the employees providing for retirement benefit, the tax benefits provided for by Republic Act No. 4917 cannot be availed of by your employees severed from the service on account of age. In view of all the foregoing, the ruling contained in our letter to you dated January 22, 1969 is hereby revoked. llcd Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue