Tax on the Retirement Pay Awarded to a Retired Employee

February 7, 1958 BIR RULING NO. 124-58 Mr. Gregorio T. Gonzales C/o Koppel (Philippines) Inc., Taft Avenue Manila S i r : Referring to your letter of February 5, 1958, I have the honor to inform you that retirement pay, if awarded to a retired employee in consideration of services rendered, is subject to withholding tax under the provisions of Supplement A to Title II of the Tax Code. The amount of tax to be withheld thereon is arrived at as follows: Divide the amount of retirement pay and the salaries earned during the year by 12 to arrive at his average monthly income. The tax due on the retired employee's average monthly income as determined above can be obtained from the monthly withholding table in Revenue Regulations No. V-33, taking into account the personal exemptions to which he is entitled as shown on his exemption certificate (B.I.R. Form W-4). Multiply the tax on the average monthly income by twelve. Deduct therefrom the total amount of tax previously withheld during the year. The result is the total amount of tax that should be deducted and withheld on the retirement pay. Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue By: (SGD.) MISAEL P. VERA Regional Director