Tax Exemption Granted to Paz Employees Retirement & Welfare Plan

June 28, 1988 BIR RULING NO. 274-88 28 (b) (7) (A) 000-00 274-88 S i r : This refers to your letter dated May 5, 1988 requesting a ruling as to whether the retirement benefits to be received by your client from the Paz Employees Retirement & Welfare Plan is exempt from tax. It is represented that your client is more than fifty (50) years old and has served La Funeraria Paz, Inc. for a period of 39 years; that in accordance with a Resolution of its Board, your client will be given retirement benefits equal to 125% of his basic salary because of his invaluable contribution to the growth and success of the company for the last 39 years as its president. In reply thereto, I have the honor to inform you that Secs. 1 and 3, Art VI of the Retirement Plan for the employees of the Paz Memorial Services, Inc. otherwise known as the PMSI Employees Retirement and Welfare Plan which was approved as a reasonable retirement benefit plan under R.A. No. 4917 (now Sec. 28(b)(7)(A) of the Tax Code, as amended) provide for normal retirement of an employee-member at age 60 and optional retirement with at least 10 years of service in the employer-company. Moreover, the retirement benefit shall be equal to the sum equivalent to the total of the members contributions and the contributions of the company and the income accrued on both, if any (Sec. 1, Art. V, Plan). Such being the case, if your client is qualified to retire under the normal retirement provision of the plan, i.e., he must be 60 years old with at least ten (10) continuous years of service, the benefit that he will receive shall be equal to the total of his contributions and that of the company and the income accrued on both, if any. However, if your client will receive a retirement benefit in excess of what is provided in the plan, the excess shall be subject to income tax and consequently to the withholding tax on wages prescribed by Section 71, Chapter X, Title II of the Tax Code as amended by Batas Pambansa Blg. 135 and implemented by Revenue Regulations No. 6-82. cdtech Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner