Retirement Benefits are Exempted from Philippine Income Tax

March 30, 1990 BIR RULING NO. 050-90 28 (b) (7) (A) 000-00 050-90 Gentlemen : This refers to your letter dated February 28, 1990 requesting a ruling as to whether or not the retirement benefits under your company's retirement plan which has been determined by this Office as a reasonable retirement benefit plan within the contemplation of Republic Act No. 4917 (now Section 28(b)(7)(A) of the Tax Code) is subject to tax in view of the issuance of Presidential Decree No. 220. In reply thereto, I have the honor to inform you that Presidential Decree No. 220 does not cover the retirement benefits or pensions of officials and employees of private firms in the Philippines which shall continue to be governed by Republic Act No. 4917 as amplified by Revenue Regulations No. 1-68 as amended by Revenue Regulations No. 1-83 (par. 2, Sec. 2, Revenue Regulations No. 6-73 dated July 10, 1973 implementing Presidential Decree No. 220). Presidential Decree No. 220 which took effect on June 20, 1973 exempts from Philippine income tax, social security benefits, gratuities, pensions and other similar benefits arising out of employment abroad and received by employees and workers who are retired and who came to reside in the Philippines for the remaining years of their lives, be they citizens of the Philippines or not, and whether the employer is a foreign government or foreign private entity. The exemption equally, applies to such incomes received by citizens of the Philippines after their retirement from the same sources even if they should continue to reside in the foreign country where they may emigrate after their retirement (Revenue Regulations No. 6-73 supra) In other words, social security benefits, gratuities, pensions or other similar benefits received by resident citizens, resident aliens, and non-resident citizens from foreign governments or from foreign private entities during the taxable year 1973, i.e., January 1 to December 31, 1973 and thereafter shall be exempt from Philippine income tax. Such being the case, the retirement benefits to be received by your employees under your company's retirement benefit plan which has been determined by this Office as a reasonable retirement benefit plan within the contemplation of Republic Act No. 4917 (now Section 28(b)(7)(A) of the Tax Code) on November 20, 1978 shall be exempt from all taxes, notwithstanding P.D. No. 220. aisadc Very truly yours, (SGD.) JOSE U. ONG Commissioner