BIR Ruling [DA-035-00]

January 18, 2000 BIR RULING [DA-035-00] Ms . Estrella S . Sagun Lot 1, Block 9, Phase I-B Pacita Complex San Pedro, Laguna M a d a m : This refers to your letter dated September 24, 1999 requesting for a ruling whether or not the benefits you have received from the 1999 Separation Assistance Plan of the Philippine Tourism Authority (PTA) is exempt from tax. It is represented that last June 30, 1999, you have availed of the Separation Assistance Plan offered by your employer, PTA, for holders of positions identified as co-terminus with the incumbent as part of management's streamlining program; that at the same time, you applied for optional retirement with GSIS under Republic Act No. 8291 at age 53 having served PTA for 25 years; and that income tax was withheld from said retirement benefit despite the ruling made by your Legal Department in favor of the retirees. In reply, please be informed that pursuant to Section 32(B)(6)(f) of the Tax Code of 1997, benefits received from the GSIS under Republic Act No. 8291, including retirement gratuity received by government officials and employees shall not be included in the gross income and shall be exempt from income tax. 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 payments 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 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. (BIR Ruling No. 142-99 dated September 13, 1999) On the basis of the foregoing and considering that you have availed of the Separation Assistance Plan offered by your employer for holders of positions identified as co-terminus with the incumbent as part of management's streamlining program, the payment of the Separation Assistance Plan benefits shall be considered as part of their retirement gratuity and therefore exempt from the payments of income tax pursuant to Section 32(B)(69)(f) of the Tax Code of 1997. Likewise, considering further that you applied for optional retirement with GSIS under Republic Act No. 8291 at age 53 having served PTA for 25 years, benefits received from the GSIS under Republic Act No. 8291, including retirement gratuity received by government officials and employees shall not be included in the gross income and shall be exempt from income tax and consequently from withholding tax prescribed in Section 79, Chapter XIII, Title II of the Tax Code of 1997. The payment of your salaries, however, is subject to income tax and consequently to the 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group