Non-taxability of the Annuity Contracts

March 2, 1960 BIR RULING NO. 102-60 Sycip, Gorres, Velayo & Co. Certified Public Accountants 490 San Luis, Manila Gentlemen : Reference is made to your letter dated February 8, 1960, wherein you stated the following: cdtech "The Company maintains a Pension Plan under the administration of the Trustees which is funded with the company's contributions determined in accordance with a formula outlined in the Plan. Upon the retirement or termination of service of an employee for causes specified therein, distribution is made to him in the form of an annuity contract pursuant to an arrangement with an insurance company under which annuity payments are to be made to the retiring employee. It is in the sole discretion of the Trustees to make distributions in the form of annuity contracts. Under the Pension Plan, the annuity contracts are without any cash surrender value." You now request a ruling from this Office as to whether or not the annuity contracts referred to above are subject to withholding tax upon delivery of the same to the retiring employees. And in the negative, are annuity payments paid or made available to the retiring employees by the insurance company in accordance with the annuity contracts awarded pursuant to the arrangement above described, subject to the withholding tax. In reply thereto, I have the honor to inform you that the above annuity contracts are not subject to withholding tax upon delivery of the same to the retiring employees. However, any amount actually paid or made available to a retiring employee under the aforesaid annuity contracts is subject to income tax and should be reported by the recipient employee in the year of receipts. Very truly yours, MELECIO R. DOMINGO Commissioner of Internal Revenue