BIR Ruling [DA-114-02]

July 2, 2002 BIR RULING [DA-114-02] Ms. Marcelina B. Cabaneiro c/o Victor R. Potenciano Medical Center 163 EDSA, Mandaluyong City M a d a m : This refers to your letter dated June 24, 2002 requesting for a ruling as to whether or not the retirement benefits given under RA 7641, otherwise known as the Labor Code of the Philippines, by the Victor R. Potenciano Medical Center, (formerly Polymedic General Hospital) [VRPM] is exempt from income tax and consequently from withholding tax. It is represented that you are an employee of the VRPM or has been in the service for an aggregate period of 27 years; that the VRPM has no retirement benefit plan duly approved by the Bureau of Internal Revenue (BIR); and that it is required under RA No. 7641 to pay a retiree the following benefits: 1. One half month salary 15.0 days 2. Five days Incentive leave 5.0 days 3. One over twelve (1/12) 13th month pay 2.5 days or a total of 22.5 days for every year of service. In reply thereto, 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. Accordingly, the retirement benefits to be paid by VRPM to you under RA No. 7641 are not subject to income tax and consequently, to withholding tax prescribed by Section 79, Chapter XIII, Title II of the Tax Code of 1997. (BIR Ruling No. 050-98 dated April 27, 1998) 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, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service