BIR Ruling [DA-134-97]

March 31, 1997 BIR RULING [DA-134-97] Ms. Adelina Y. Leones Blk. 1, Lot 5, Lolo Tiniong Subd. San Rafael, Montalban, Rizal M a d a m : This refers to your undated letter requesting a ruling as to whether the retirement benefits to be received by you from Fortune Tobacco Corporation, are exempt from income tax and consequently from the withholding tax. It appears that you were employed by Fortune Tobacco from January 23, 1975 to September 23, 1996; and that you are fifty two (52) years of age; and have rendered a total of twenty one (21) years of service with the company. In reply thereto, please be informed that under the Fortune Tobacco Corporation Employee's Retirement Plan which has been determined by this Office as a reasonable retirement benefit plan within the contemplation of Section 28 (b) (7) (A) of the Tax Code on August 29, 1991, retirement of an employee-member shall be on "the day he attains age 60 or upon completion of thirty (30) years of service"; and early retirement upon reaching "the age of fifty-five (55) years with at least ten (10) years of continuous service or upon completion of twenty (20) years of service regardless of the employees age" (Secs. 1 and 2, Art. VI, Plan). The employee-member retiring at age 60 must have rendered at least ten (10) years of service and the employee-member retiring upon completion of 30 or 20 years of service must be at least fifty (50) years of age at the time of retirement (Sec. 28 (b) (7) (A), Tax Code, as amended.) Considering that you are already fifty two (52) years of age and have rendered twenty one (21) years of service to the company, the retirement benefits to be received by you from the company shall be exempt from income tax, and consequently from the withholding tax prescribed under Section 72, Chapter X, Title II of the Tax Code, as amended by Batas Pambansa Blg. 135 and implemented by Revenue Regulations No. 6-82, as amended. The tax exemption will include the company's payment for cash equivalent of accumulated vacation and sick leave credits of the said employee but does not include the company's payment for salary . (BIR Ruling No. 098-91, dated June 4, 1991) Very truly yours, (SGD.) ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)