BIR Ruling [DA-022-01]

February 21, 2001 BIR RULING [DA-022-01] R.R. No. 2-98 Philippine Tourism Authority DOT Bldg., T.M. Kalaw St. Teodoro F. Valencia Circle Ermita, Manila Attention: Angelito T . Banayo Gentlemen : This refers to your letter dated August 25, 2000, requesting for an authority to refund the taxes withheld from the salary and separation benefits of Ms . Marsha Paras involving the total amount of P216,613.42, which amount will then be deducted by Philippine Tourism Authority (PTA) from its current withholding tax remittance. Based on the records of the case, Ms. Paras availed herself of the Separation Assistance Plan and optionally retired on May 1, 1999; that from her annual salary during the year 1999, the amount of P14,030.16 was withheld while the amount of P202,583.26 was deducted from her separation benefits or a total tax withheld amounting to P216,613.42; that the said amount of P216,613.42 was remitted on January 31, 2000 when you filed your Annual Remittance Return of Income Taxes Withheld (BIR Form 1604) for year 1999 with the Revenue District Office No. 33, Revenue Region No. 6, Manila; and that this Office, in response to your request "for guidance on whether or not the amount granted in favor of Ms. Marsha Paras and others similarly situated under your Separation Assistance Plan, and from which was deducted an amount as withholding tax on income, may likewise be considered as part of retirement gratuity and, therefore, exempt from the payment of income tax", issued an unnumbered ruling (DA-281-2000) on July 10, 2000 pertinent portion or which are hereby quoted, viz: xxx xxx xxx For officials and employees of the PTA who are already qualified to avail of the optional and/or compulsory retirement under Republic Act No. 8291, the payment of the Separation Assistance Plan benefits shall be considered as part of their retirement gratuity and therefore exempt from the payment of income tax pursuant to Section 32(B)(6)(f) of the Tax Code of 1997. However, for officials/employees of the PTA who are not yet qualified to avail of the optional and/or compulsory retirement and who want to avail of the Separation Assistance Plan by resigning from their position, the benefits that they will receive under the Plan shall be considered as part of their compensation income which are subject to income tax and consequently to the withholding tax on wages under Section 79, Chapter XIII, Title II of the Tax Code of 1997." hence, the instant request since Ms. Paras is exempt from the payment of income tax and correspondingly from withholding tax. In reply, we regret to inform you that your request cannot be granted for lack of legal basis. Under Revenue Regulations No. 2-98, the employer is obligated to refund the excess withholding tax not later January 25 of the succeeding year. However, in case of termination of employment before December, the refund shall be given to the employee at the payment of the last compensation during the year. Since the remittance of the taxes withheld from the salary and separation benefits of Ms. Paras was made on January 31, 2000, PTA is no longer entitled to deduct the said excess taxes withheld from its current remittable amount of withholding tax. At any rate, it appears that Ms. Paras had already filed on August 21, 2000 a written claim for the refund of the said amount of P216,613.42 before the Revenue District Officer of Revenue District No. 33. Rest assured that upon receipt of a favorable recommendation from the Revenue District Officer concerned, this Office will immediately refund to Ms. Paras the tax erroneously withheld from her separation benefits. EIASDT Very truly yours, (SGD.) RENE G. BAEZ Commissioner of Internal Revenue