BIR Ruling [DA-426-99]

July 27, 1999 BIR RULING [DA-426-99] 32 (b) (6) (a) 050-98 dated April 27, 1998 Federation of Free Workers FFW Building, 1943 Taft Avenue Malate, Manila Attention: Mr. Abundio S. Andes, Jr. Union-President Gentlemen : This refers to your letter dated March 19, 1999 requesting for a ruling as to whether or not the retirement benefits given under R.A. No. 7641 are subject to income tax and consequently to withholding tax. It appears that Quality Container Corporation, a corporation duly organized and existing under the laws of the Philippines with business address at No. 37 Eulogia Drive, Barrio Kangkong, Quezon City and Samahang Manggagawa sa Quality Container Corporation Federation of Free Workers entered into a Collective Bargaining Agreement (CBA) in order to promote and foster cordial and harmonious relationship between the former and the latter; that the CBA established a basic understanding relative to rate of pay, wages, hours of work and other terms and conditions of employment and provided means for the prompt and amicable adjustment of all disputes or grievances arising thereunder; that in 1998 most of your co-workers retired from their employment after reaching the age of sixty (60) years old and have rendered at least ten (10) years of service to the company; and that Quality Container Corporation has no retirement benefit plan duly approved by the Bureau of Internal Revenue. In reply, please be informed that pursuant to Section 32(B)(6)(a) of the Tax Code of 1997, retirement benefits received under R.A. No. 7641 shall not be included in the gross income and therefore not forming part of the taxable income. Accordingly, the retirement benefits to be paid to your co-workers by Quality Container Corporation under R.A. No. 7641 shall not be 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) cHCIEA 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)