BIR Ruling [DA-282-00]

July 10, 2000 BIR RULING [DA-282-00] 32 (B) (6) (a) DA 011-99 DA-282-2000 Mr. Enofre G. Villena 700 Belton Street Brookside Hills Cainta, Rizal S i r : This refers to your letter requesting for a ruling as to whether or not the retirement benefits received under the Early Retirement Incentive Program offered by the S.C. Johnson & Son, Inc. are exempt from income tax and consequently from withholding tax. llcd It appears that the S.C. Johnson & Son, Inc. Retirement Plan has been determined and adjudicated by the BIR as a reasonable private benefit plan, that under the said Plan with the Trustee bank, any participant with the consent of the company, may elect to retire on or after the first day of the month coinciding with or following his fiftieth (50th) birthday, provided he has at such time completed at least ten (10) years of credited service; that you are one of the employees who have availed of the ERIP; that at the time of the availment of the ERIP you are 50 years old and have rendered 15 years of service to the company; and that your total gross retirement benefits amounted to P4,041,534.44 of which the amount of P1,361,274.58 was withheld and remitted to the BIR. In reply, please be informed that Section 32(B)(6)(a) of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98, provides that retirement benefits received under R.A. No. 7641 and those received by officials and employees of private firms, whether individual or corporate, in accordance with a reasonable private benefit plan maintained by the employer: Provided, that the retiring official or employee has been in the service of the same employer for at least ten (10) years and is not less than fifty (50) years of age at the time of his retirement. . ." shall be excluded from gross income. The above-cited section of the Tax Code provides merely for the minimum requirements of ten (10) years of service and not less than fifty (50) years of age in order that the retirement benefits may be exempt from income tax. Considering that the retirement plan rules and regulations of S.C. Johnson & Son, Inc., particularly its early retirement date, is in compliance with the above-cited section of the Tax Code, employees availing the early retirement incentive program being offered by S.C. Johnson & Son, Inc. shall be exempt from income tax and consequently from withholding tax provided they have complied with the above-mentioned requirements of 50 years of age and at least 10 years of credited service. Such being the case, and since you have complied with the early retirement date of 50 years of age and completion of at least 15 years of credited service with the S.C. Johnson & Son, Inc. this Office is of the opinion that the retirement benefits paid to you under the ERIP of S.C. Johnson & Son, Inc. are exempt from income tax and consequently from withholding tax prescribed by Section 79, Chapter XIII, Title II of the said Code. Accordingly, the retirement benefits which you received from S.C. Johnson & Son, Inc. under its Early Retirement Program is exempt from income tax and consequently from withholding tax. (BIR Ruling No. DA011-99 dated Jan. 1, 1999) 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, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal & Inspection Group