BIR Ruling [DA-014-01]

February 12, 2001 BIR RULING [DA-014-01] S32 (B) (6) (A) 050-98 4-27-98 Ms . Estela R . Hernaiz No. 33 Isabel Avenue, Malabon Metro Manila M a d a m : This refers to your letter dated May 2, 2000 requesting in effect for a ruling as to whether the retirement pay you received is exempt from withholding tax imposed under Section 79, Chapter XIII, Title II of the Tax Code of 1997. Documents submitted disclosed that you were under the employment of Candymaker, Inc. from May 16, 1970 up to March 23, 1998, approximately twenty-eight (28) years in service; that you were born on February 12, 1938, or that you were sixty (60) years old on the day you retired from service on March 23, 1998; that your company has no collective bargaining agreement and has no retirement plan; that on a cash voucher of Candymaker, Inc. dated April 1998, it appears that you received a retirement pay of P155,260.00 and a 13th month bonus of P19,407.50, or a total of P174,667.50; that on said cash voucher, the total amount of P174,667.50 was labelled as retirement pay and was subjected to deductions among which is the amount of P24,153.28 as withholding tax; that the total amount you actually received is P149,865.92, labelled as retirement pay as should in Candymaker's cash voucher. In reply, please be informed that pursuant to Section 32 (B)(6)(a) of the Tax Code of 1997, retirement benefits received under Republic Act No. 7641 shall not be included in the gross income and therefore not forming part of the taxable income. (BIR Ruling No. 050-98 dated April 27, 1998). Under the said Act, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is declared the compulsory retirement age, who has served at least five (5) years in the service of the same employer, may retire and shall be entitled to retirement pay equivalent to at least one-half () month salary for every year of service, a fraction of at least six (6) months being considered as one whole year. Based on the foregoing and since-at the time of your retirement you were sixty (60) years of age and has rendered twenty eight (28) years of service, the retirement benefit/pay you received pursuant to R.A. 7641 is not subject to income tax and consequently to the withholding tax imposed under Section 79, Chapter XIII, Title II of the Tax Code of 1997. TCaADS The payment of the 13th month pay and other benefits in excess of the Thirty Thousand Pesos (P30,000.00) threshold, and the salary you received, however, is subject to income tax and consequently to withholding tax. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal & Inspection Group