BIR Ruling [DA-574-99]

October 6, 1999 BIR RULING [DA-574-99] Col . Napoleon B . Sayson 2428 Dapdap Street UHV Paraaque, Metro Manila S i r : This refers to your letter dated August 1, 1997 requesting for a ruling as to whether or not the retirement benefits which you will receive from Integrated Properties and Development Corporation is subject to withholding tax. It is represented that you are 65 years old with a total service of 19 years; that you retired from your company last January 31, 1997; that you are expecting a retirement benefit of about P351,000.00; and that your company has no qualified private retirement plan. In reply thereto, please be informed that prior to the effectivity of Republic Act No. 8424, otherwise known as the Tax Reform Act of 1997 on January 1, 1998, retirement benefits received by private sector employees under R.A. No. 7461 are not exempt from income tax because the law does not provide for its tax exemption. However, effective January 1, 1998, retirement benefits received under R.A. No. 7641 shall not be included in gross income and shall be exempt from income tax. Moreover, the exemption from income tax of retirement benefits to be received by private sector employees under R.A. No. 4917 (now Section 32(B)(6)(a) of the Tax Code of 1997) cannot be applied to your retirement benefits because your company does not maintain a qualified retirement benefit plan. Such being the case, and since you retired from the Integrated Development Corporation on January 31, 1997, or prior to the effectivity of R.A. No. 8424 on January 1, 1998, your retirement benefits received under R.A. No. 7641 are subject to income tax and consequently to the withholding tax prescribed under Section 79, Chapter III, Title II of the Tax Code of 1997. (BIR Ruling No. 86-94 dated April 6, 1994). Very truly yours, Commissioner of Internal Revenue (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)