BIR Ruling [DA-463-99]

August 12, 1999 BIR RULING [DA-463-99] Atty. Mercy ZM. Pine No. 1 Hillside Loop Street Blueridge, Quezon City M a d a m : This refers to your letter dated June 3, 1999 requesting, in effect, for a ruling as to whether or not the benefits given under the Early Retirement Incentive Program III (ERIP III) offered by the Development Bank of the Philippines (DBP) are exempt from income tax and consequently from withholding tax pursuant to Section 32(B)(6)(a) of the Tax Code of 1997. cdlex It appears that DBP Provident Fund has been determined and adjudicated by the BIR as a reasonable private benefit plan on April 17, 1996; that the ERIP III offered by the DBP which, pursuant to its charter is restructuring its reorganizational set-up in line with its on-going rehabilitation; that being qualified under the implementing guidelines of the Program, i.e., fifty (50) years of age and ten (10) years in the service of the Bank, you availed of the said program; and that DBP however, categorizes you as a resignee not a retiree to which the amount of P106,000.00 was withheld on your benefits as withholding tax. 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. In the instant case, the retirement plan rules and regulations of DBP Provident Fund provides under its early retirement date that an employee who is fifty (50) years of age and has rendered ten (10) years of service to the bank may avail of the early retirement program. Considering that you have met the twin requirements of the said plan, you thereby acquired vested rights over the same and consequently, the retirement benefits to be given to you under the ERIP III by DBP shall be exempt from income tax and consequently from withholding tax prescribed by Section 79, Chapter XIII, Title II of the Tax Code of 1997. 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 and Enforcement Group)