House Bill No. 5307 Entitled An Act Granting Income Tax Exemptions to Employees Both from Public and Private Agencies Who are Due for Retirement

March 8, 1996 BIR RULING [DA-103-96] MEMORANDUM FOR : Mr. Donald Z. Marasigan Technical Staff Chief Committee on Ways and Means House of Representatives Quezon City FROM : Liwayway Vinzons-Chato Commissioner of Internal Revenue SUBJECT : House Bill No. 5307 Entitled An Act Granting Income Tax Exemptions to Employees Both from Public and Private Agencies Who are Due for Retirement Features of the House Bill SEC. 1. All employees both from public and private agencies who are due for retirement shall be exempt from payment of income tax prior to their retirement as follows: cdta a) Compulsory retirement shall entitle the retiree to three (3) years income tax exemptions prior to his retirement; b) Optional retirement shall entitle the retiree to two (2) years income tax exemptions prior to his retirement; c) Disability retirement shall entitle the retiree to one (1) year income tax exemption prior to his retirement. COMMENTS: While the purpose of the proposed bill is to relieve government and private sector employees from the burden of paying their annual income tax in the last few years of their employment to give them the full enjoyment of their salaries nevertheless the government stands to lose a great amount of revenue considering that said employees who are retiring in two or three years time, are mostly occupying executive positions receiving high salaries and enormous allowances. As regards disability retirement, it is believed that there is no need to give the retiree a one (1) year income tax exemption prior to his retirement because any amount which will be received by him as a result of his disability retirement are exempt from income tax pursuant to Section 28(b)(7)(B) of the Tax Code, as amended. In view thereof, this Office does not recommend the passage of House Bill No. 5307 which grants income tax exemptions to employees both from public and private agencies who are due for retirement. cdtech Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue