Exemption of Retirement Benefits from Income Tax

August 3, 1990 BIR RULING NO. 143-90 28 (b) (7) (A) 1-87 143-90 S i r : This refers to your letter dated January 8, 1990 requesting in effect exemption from the withholding tax of the retirement benefits which you will receive from PCIBank. aisadc It is represented that you started working with the bank on September 3, 1963 and upon doctor's advice, you retired on December 31, 1989 due to Hypertensive Coronary Artery Disease. In reply, please be informed that pursuant to Section 28 (b)(7)(B) of the Tax Code, as amended, any amount received by an official or employee or by his heirs from the employer as a consequence of separation of such official or employee from the service of the employer due to death, sickness and other physical disability or for any cause beyond the control of the said official or employee is exempt from income tax. It is noted that under Section 4 (b) of the PCIBank Retirement Plan, in the event of death, permanent disability (as certified by a licensed physician acceptable to or designated by the Bank), or termination or employment for reasons not attributable to the member's own fault, such as retrenchment or redundancy, the member or his beneficiaries, as the case may be, shall be paid the benefits determined in accordance with the schedule set forth in Section 4 (a) of said Plan. In view thereof, this Office is of the opinion as it hereby holds that any and all amounts which you will receive from PCIBank as a result of your separation from the service of the bank due to sickness are exempt from income taxes and, consequently, from withholding tax prescribed by 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. It is however, understood that this tax exemption does not include PCIBank's payments for your salary and cash equivalent of your accumulated vacation and sick leaves, if any. cdta Very truly yours, (SGD.) JOSE U. ONG Commissioner