BIR Ruling [DA-228-03]

July 18, 2003 BIR RULING [DA-228-03] Sec. (B) (6) (f) BIR Ruling No. DA 281-00 Mrs. Adoracion S. Baadera 1970 Pilar Hidalgo Lim St. Malate, Manila M a d a m : This refers to your letter dated January 28, 2003 requesting for a refund of the tax withheld from you by your employer. It is represented that the Philippine Tourism Authority (PTA) offered its employees a Separation Assistance Plan; that according to the plan, those holding coterminous items with the incumbent and who desire to be separated from the service will be granted financial assistance depending on the length of service; that you are one of those who availed of the separation assistance program of the PTA last May 1999; that you were then 48 years old and has rendered 15 years of service in the said office; that you received your retirement gratuities as a GSIS retiree under Republic Act (R.A.) No. 8291 dated July 1, 1999; that it is your opinion that since you qualified for Optional Retirement under R.A. No. 8291, the payment of your Separation Assistance Plan benefits should also be considered as part of your retirement gratuity and therefore exempt from the payment of income tax pursuant to Section 32(B)(6)(f) of the Tax Code of 1997; and that the PTA withheld the amount of Php27,609.88 income tax from the benefits you received in connection with the Separation Assistance Program and remitted to the BIR last January 31, 2000. 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 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 payment 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 Assistance 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. DA-281-00 dated July 10, 2000 ). HESCcA If as you alleged, you are qualified to avail of the optional and/or compulsory retirement under R.A. No. 8291, the payment of your Separation Assistance Plan benefits shall be considered as part of your retirement gratuity and therefore exempt from the payment of income tax pursuant to Section 32(B)(6)(f) of the Tax Code of 1997. Such being the case, you may apply for a refund with the Revenue District Office concerned which has jurisdiction over the same pursuant to Revenue Administrative Order 3-2003. 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group