BIR Ruling [DA-385-00]

November 7, 2000 BIR RULING [DA-385-00] 79 58-97 Mr. Edilberto T. Cuetara 21 Road 12-B UPS-5 Sucat, Paraaque City S i r : This refers to your letter dated November 15, 1999 indorsed to this Office by the Office of the President, Presidential Action Center, requesting in effect for exemption from payment of your income tax. It is represented that you are a retiree; that you retired from the Social Security System (SSS); that, however, you are still connected with the working force of the same institution; that your salary is still subject to withholding tax; and that you are hoping to get a break from payment of your taxes as you are already in your twilight years and want to enjoy the remaining years of your life. In reply, please be informed that Section 2.79 of Revenue Regulations No. 2-98, implementing Section 79 of the Tax Code of 1997 provides that "(A) Requirement of Withholding . Every employer must withhold from compensation paid, an amount computed in accordance with these regulations. Provided, that no withholding of a tax shall be required where the total compensation income of an individual does not exceed the statutory minimum wage or five thousand pesos (P5,000.00) monthly (sixty thousand pesos (P60,000.00) a year), whichever is higher. Employees whose total annual compensation, as determined in the preceding paragraph, does not exceed P60,000.00 shall be given two options with which to pay his income tax due to wit: (1) His compensation income shall be subjected to withholding tax, but he shall not be required to file the income tax return prescribed in Section 51 of the Code (filing of an individual return) except when covered by any of the situations enumerated in Section 2.83.4 of these Regulations. SECHIA (2) His compensation income shall not be subject to a withholding tax but he shall file his annual income tax return and pay the tax due thereon, annually. Where the employee has opted to have his compensation income subjected to withholding so as to be relieved of the obligation of filing an annual income tax return and paying his tax due on a lump sum basis, he shall execute a waiver in a prescribed BIR form of his exemption from withholding which shall constitute the authority for the employer to apply the withholding tax table provided under these Regulations. The employee who opts to file the Income Tax Return shall file the same not later than April 15 of the year immediately following the taxable year." Moreover, pursuant to Section 3 of Revenue Regulations No. 2-94, implementing Section 4 of Republic Act (R.A.) No. 7432, otherwise known as the "Senior Citizens Act," senior citizens whose annual taxable income from only one employer does not exceed the poverty level of P60,000.00 or such amount as may be determined by the National Economic and Development Authority (NEDA) for a certain taxable year shall be exempt from the payment of individual income tax and consequently from the withholding tax and his exemption shall be determined by the Regional Director of the Revenue Region having jurisdiction of the city or municipality where the senior citizen is a permanent resident. Conversely, senior citizens whose annual taxable income exceeds P60,000.00 shall not be exempt from the payment of individual income tax and consequently shall be subject to the withholding tax prescribed under Section 79, Chapter 10, Title II of the Tax Code of 1997. (BIR Ruling No. 58-97 dated May 15, 1997) Accordingly, if you are covered by R.A. No. 7432 and your annual taxable income (compensation income) does not exceed P60,000.00 for the entire year, you are exempt from payment of your income tax and consequently from the withholding tax. However, if your annual taxable income exceeds P60,000.00, this Office has no power to exempt you from payment of your income tax and consequently to the withholding tax. 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. ISAaTH Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal & Inspection Group