Retirement Benefits Received under R.A. No. 7641 Not Included in Gross Income

April 27, 1998 BIR RULING NO. 050-98 32 (B) (6) (a)-000-00-050-98 Welding Industries of the Philippines, Inc. P.O. Box 3822 Manila Attention: Mr . Ernesto T . Oba Chief Accountant & Office Manager Gentlemen : This refers to your letter dated February 17, 1998 stating that your company has no retirement benefit plan approved by the Bureau of Internal Revenue; that pursuant to Republic Act No. 7641, you are obliged to pay a retiree the following: 1. One half month salary 15.0 days 2. Five days Incentive leave 5.0 days 3. One over twelve (1/12) 13th Month pay 2.5 days or a total of 22.5 days for every year of service. LLjur Based on the foregoing, you are requesting for ruling as to whether the aforesaid retirement benefits are subject to income tax and consequently to withholding tax. In reply, please be informed that pursuant to Section 32(B)(6)(a) of the Tax Code of 1997 retirement benefits received under Republic Act 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 by you to your retiring workers under R.A. No. 7641 are not subject to income tax and consequently, to withholding tax prescribed by Section 79, Chapter XIII, Title II of the Tax Code of 1997. [formerly Section 72, Chapter 10, Title II of the Tax Code, as amended] Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue