BIR Ruling [DA-179-99]

March 23, 1999 BIR RULING [DA-179-99] Mr. Ruben E. Reyes 7-B Ortega St., Tonsuya Malabon, Metro Manila S i r : This refers to your letter dated January 17, 1999 stating that effective November 2, 1998, after more than six (6) years of service with High-Desert StopOvers, Inc., you were retired in accordance with the company's policy of retirement at age 60; that since the company has no Retirement Benefit Plan duly approved by this Office, you were paid the total amount equivalent to month of regular pay, unused leave credits, proportionate 13th month pay and 1 month bonus; and that you were assessed the usual withholding tax which High-Desert StopOvers, Inc. refused to refund pending official confirmation from this Office that your retirement pay under Republic Act No. 7641 is indeed exempt from income tax. Based on the foregoing, you are requesting for ruling as to whether or not the aforesaid retirement benefits are subject to income and consequently to withholding tax. In reply, 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 included in the gross income and therefore not forming part of the taxable income. Accordingly, the retirement benefits to be paid to you under R.A. 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 will serve as authority for High-Desert StopOvers, Inc. to refund to you the withholding tax deducted from your retirement benefits in the event that the same has not yet been remitted to the Bureau of Internal Revenue. cdll Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)