Tax on the Retirement Gratuity or Pension Received by an Officer or Enlisted Man of the AFP

February 13, 1958 BIR RULING NO. 132-58 Mr. Jose N. Pura 2255 Leveriza Street Malate, Manila S i r : In reply to the queries contained in your letter dated January 9, 1958, I have the honor to inform you as follows: LexLib Retirement gratuity or pension received by an officer or enlisted man of the Armed Forces of the Philippines under the provisions of Republic Act No. 340, otherwise known as the "Armed Forces Retirement Act." is subject to income tax there being no provision of law specifically exempting the same from income tax. However, the aforesaid retirement gratuity or pension is not subject to the additional residence tax, as the same is not comprehended within the term salaries or gross receipts or earnings derived by a person from the exercise of a profession or from the pursuit of any occupation within the purview of Section 1(c) of Commonwealth Act No. 465, otherwise known as the Residence Tax Law. Every inhabitant of the Philippines over eighteen years of age who has been regularly employed on a wage or salary basis for at least thirty consecutive working days during any calendar year at the rate of not less than fifty centavos a day, or who is engaged in business or occupation, or who owns real property with and aggregate assessed value of one thousand pesos or more, or who is required by law to file an income tax return shall pay an annual residence tax of fifty centavos. (Sec. 2 of Comm. Act No. 465) Under the aforecited provisions of law, a person over eighteen years of age who is required to file an income tax return is subject to the basic residence tax, even if he is not regularly employed, or is not engaged in business or occupation, or does not own real property with an aggregate assessed value of P1,000.00 or more. Under Section 45(a) of the Tax Code, every citizen or resident of the Philippines having a gross income of P1,800.00 or over from all sources during a calendar year is required to file an income tax return. Accordingly, if the retirement gratuity or pension received by a person under the provision of Republic Act No. 340, amounts to P1,800.00 or over during a calendar year, he is required to file an income tax return and therefore subject to the basic residence tax, even if he is over sixty years of age and the aforesaid pension is his only source of income. Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue