BIR Ruling [DA-285-00]

July 18, 2000 BIR RULING [DA-285-00] Office of the President Presidential Legislative Liaison Office Malacaang Palace Manila Attention: Hon . Jimmie C . Policarpio Presidential Legislative Adviser and Head, PLLO Gentlemen : This refers to your letter dated May 24, 2000 requesting for our comments and recommendation on House Bill No. 9999 entitled "AN ACT EXEMPTING FROM INTERNAL REVENUE TAXATION THE SEPARATION PAY, RETIREMENT PAY AND ALL MONETARY BENEFITS, HOWEVER DESIGNATED, OF EMPLOYEES WHO ARE SEPARATED FROM WORK FOR ANY CAUSE." LexLib This Office believes that there is no need for the proposed bill since the benefits mentioned in the said bill are well-taken cared of by Tax Code of 1997. We quote Section 32(B)(6)(a)(b)(c)(d)(e) and (f) of the same Code as follows: "(B) Exclusions from Gross Income . The following items shall not be included in gross income and shall be exempt from taxation under this Title: xxx xxx xxx "(6) Retirement Benefits, Pensions, Gratuities, etc . "(a) Retirement benefits received under Republic Act 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: Provided, further, That the benefits granted under this subparagraph shall be availed of by an official or employee only once. For purposes of this Subsection, the term ' reasonable private benefit plan ' means a pension, gratuity, stock bonus or profit-sharing plan maintained by an employer for the benefit of some or all of his officials or employees, wherein contributions are made by such employer for the officials or employees, or both, for the purpose of distributing to such officials and employees the earnings and principal of the fund thus accumulated, and wherein it is provided in said plan that at no time shall any part of the corpus or income of the fund be used for, or be diverted to, any purpose other than for the exclusive benefit of the said officials and employees. "b) Any amount received by an official or employee or by his heirs from the employer as a consequence of separation of such official or employee from the service of the employer because of death, sickness or other physical disability or for any cause beyond the control of the said official or employee. "(c) The provisions of any existing law to the contrary notwithstanding, social security benefits, retirement gratuities, pensions and other similar benefits received by resident or nonresident citizens of the Philippines or aliens who come to reside permanently in the Philippines from foreign government agencies and other institutions, private or public. "(d) Payments of benefits due or to become due to any person residing in the Philippines under the laws of the United States administered by the United States Veterans Administration. "(e) Benefits received from or enjoyed under the Social Security System in accordance with the provisions of Republic Act No. 8282. "(f) Benefits received from the GSIS under Republic Act No. 8291, including retirement gratuity received by government officials and employees.' We strongly oppose the payment of benefits to an employee " separated from work for any cause " as this would be contrary to law, public order, public policy, morals, or good customs or prejudicial to a third person with a right recognized by law. Furthermore, it is well settled in our jurisprudence that every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. To allow payment of benefits to an employee dismissed with a cause is absurd as this would be tantamount to giving reward to a guilty party. Such situation is awkward as it placed the employer at the mercy of an erring employee. Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal & Inspection Group