Whether Retirement Benefits to be Received from Lyceum of the Philippines is Subject to Income Tax

September 4, 1998 BIR RULING NO. 125-98 32 (B) (6) (a)-000-00-125-98 Mr. Angel Q. Yoingco Lyceum of the Philippines Manila S i r : This refers to your undated letter requesting a ruling as to whether or not the retirement benefits which you will receive from the Lyceum of the Philippines is subject to income tax. It is represented that you will be retiring from the Lyceum of the Philippines effective September 14, 1998; and that the Lyceum of the Philippines has informed you that your retirement benefits will be subjected to withholding tax since your previous retirement benefits when you retired from the Department of Finance in 1990 was exempt from income tax. In reply thereto, please be informed that retirement benefits under a qualified private benefit plan within the contemplation of Section 32(B)(6)(a) of the Tax Code of 1997 (then Section 28(b)(7)(A) of the Tax Code of 1977) or under Republic Act No. 7641, shall not be included in gross income and shall be exempt from income tax and consequently from the withholding tax prescribed in Section 79, Chapter XIII, Title II of the Tax Code of 1997 (then Section 72 of the Tax Code, as amended and as implemented by Revenue Regulations No. 6-82 as amended). However, under Section 32(B)(6)(a) of the Tax Code of 1997 (then Section 28(b)(7)(A) of the Tax Code of 1977 as implemented by Revenue Regulations No. 1-68; as amended) in order to avail of the exemption with respect to retirement benefits, the following requirements must be met: (a) the plan must have been submitted to the BIR for determination of qualification as a reasonable retirement benefit plan; (b) the retiring official or employee must have been in the service of the same employer for at least 10 years and is not less than 50 years of age at the time of retirement; and (c) the retiring official or employee shall not have previously availed of the privilege under a retirement benefit plan of the same or another employer. The phrase "shall not have previously availed of the privilege under a retirement benefit plan of the same or another employer" means that the retiring official or employee must not have previously received retirement benefits from the same or another employer who have a qualified retirement benefit plan under Section 32(B)(6)(a) of the Tax Code of 1997. Such being the case, and since the retirement benefits/gratuities which you received in 1990 was from the GSIS and not from the same or another employer who have a qualified private retirement plan under Section 32(B)(6)(a) of the Tax Code of 1997 (then Section 28(b)(7)(A) of the Tax Code of 1977), your retirement benefits to be received from the Lyceum of the Philippines, under Section 32(B)(6)(a) of the Tax Code, of 1997 shall be exempt from income tax and consequently from the withholding tax prescribed in Section 79, Chapter XIII, Title II of the Tax Code of 1997, (then Section 72 of the Tax Code, as amended and as implemented by Revenue Regulations No. 6-82 as amended). Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue