Gratuity Pay you Received as a Consequence of Optional Retirement Pursuant to R.A. 1616, Subject to Income Tax and Consequently to Withholding Tax

September 29, 1997 BIR RULING NO. 107-97 28 (b) (7) (F) 000-00 107-97 Ms. Nimfa L. Ferrer 639-A Callejon H. General Lucban, Gagalangin, Manila M a d a m : This refers to your letter dated May 21, 1997, requesting for ruling on whether or not the gratuity pay you received as a consequence of your optional retirement pursuant to R.A. 1616, is subject to income tax and consequently to withholding tax. LLjur It is represented that you have been employed in Quedan & Rural Credit Guarantee Corporation (QUEDANCOR), located at Ablaza Building, 117 E. Rodriguez Sr. Avenue, Quezon City, a government corporation; that it grants a gratuity pay to all regular employees who resigned from the service after rendering five (5) years of continuous service; that said gratuity pay is also given to employees who avail of the optional retirement under R.A. 1616; that you retired from QUEDANCOR on April 1, 1996 after more than twenty (20) years of service; and that you received a gratuity pay to which tax was withheld. In reply, please be informed that pursuant to Section 28(b)(7)(F),benefits received from the GSIS and retirement gratuity received by government officials and employees shall not be included in gross income and shall be exempt from taxation under Title II of the Tax Code, as amended. Such being the case, the gratuity pay you received is exempt from income tax and consequently, from withholding tax as prescribed under Section 72, Chapter 10, Title II of the Tax Code, as amended by B.P. Blg. 135 and implemented by Revenue Regulations No. 6-82, as amended. You may file a claim for refund of the tax withheld from your retirement gratuity with the Appellate Division of this Bureau. 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 as null and void. cdta Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue