BIR Ruling [DA-701-99]

December 21, 1999 BIR RULING [DA-701-99] United Container Corporation 720-A General Luis Street, corner Paso de Blas Barrio Kaybiga, Caloocan City Attention: Mr . Carlos C . Cruz President and General Manager Gentlemen : This refers to your letter dated October 28, 1999 requesting, in effect, for a ruling that the retirement benefits paid under R.A. No. 7641 to your regular employees are exempt from income tax and consequently from withholding tax. It appears that United Container Corporation, a corporation duly organized and existing under the laws of the Philippines and the National Mines and Allied Workers' Union (NAMAWU), an exclusive bargaining representative, entered into a Collective Bargaining Agreement (CBA) to set forth their agreement on rates of pay, hours of work, conditions of employment so as to promote orderly and peaceful relations with the employees; that under the CBA, any employee or worker who has rendered at least ten (10) years of continuous and unbroken service, can retire and shall be entitled to retirement pay of fifteen (15) days for every year of service provided said employee is at least 60 years of age; and that United 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 regular employees under R.A. 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) 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)