Philippine Retirement Authority

May 21, 2010 BIR RULING [DA-(C-017) 074-10] Sec. 23 (D); 32 (B) (6) (c); BIR Ruling Nos. 267-87; 012-89 Philippine Retirement Authority 4/F Citibank Center, 8741 Paseo de Roxas, Makati City Attention: Gen. Reynaldo DL. Lingat, CSEE Acting General Manager Gentlemen : This refers to your letter dated March 16, 2010 requesting confirmation of your opinion that pension remittances of Philippine Retirement Authority (PRA) members are exempted from income tax in the Philippines. It is represented that the PRA is a government corporation created under and by virtue of Executive Order No. 1037 dated July 4, 1985; that one of its basic objectives is the development and promotion of the Philippines as a retirement haven for foreign nationals; that these foreign nationals are granted permanent residency under Section 9 (d) of E.O. 1037 and that they are also issued a lifetime VISA called Special Resident Retirement Visa (SRRV); that as such, your retirees enrolled under "With Pension Scheme" are required to remit their monthly pension sourced from their country of origin to the Philippines; and that these pensioners are required by their respective taxing authorities to submit a Certification stating that their pension remittances are not taxable in the Philippines. In reply, please be informed that Section 23 (D) of the 1997 Tax Code, as amended provides that an alien individual, whether a resident or not of the Philippines, is taxable only on income derived from sources within the Philippines. However, Sec. 32 (B) (6) (c) of the National Internal Revenue Code of 1997 (Tax Code of 1997) provides: DaHSIT "Sec. 32. Gross Income. B) Exclusions from Gross Income. The following items shall not be included in gross income and shall be exempt from taxation under this Title: (6) Retirement Benefits, Pensions, Gratuities, etc. (c) The provisions of any existing law to the contrary notwithstanding, social security benefits, retirement gratuities, pensions and other similar benefits received by resident or nonresident citizens of the Philippines or aliens who come to reside permanently in the Philippines from foreign government agencies and other institutions, private or public." It is clear that the Tax Code of 1997 exempts from income tax the pensions received from foreign governments by aliens permanently residing in the Philippines. In both BIR Ruling Nos. 267-87 dated September 7, 1987 and 012-89 dated February 3, 1989, this Office held that: "Pursuant to Section 21 (a) of the Tax Code as amended, the retiree, whether a Filipino citizen or resident alien shall be subject to Philippine income tax on income received during each taxable year from all sources. However, social security benefits, retirement gratuities, pensions and other similar benefits received by the retirees, resident or non-resident citizens of the Philippines or aliens who come to reside permanently in the Philippines from foreign government agencies and other institutions, private or public are not subject to income tax. (Sec. 29 (b)(7)(c) of the Tax Code, as amended)." Based on the foregoing, this Office is of the opinion and hereby holds that pension remittances of Philippine Retirement Authority (PRA) members to the Philippines from their respective foreign governments are not subject to income tax. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. AcHEaS Very truly yours, Commissioner of Internal Revenue By: (SGD.) GREGORIO V. CABANTAC Deputy Commissioner Legal and Inspection Group