Taxability of Benefits Payable to a Retiring Employee Under a Retirement Plan

October 7, 1992 BIR RULING NO. 279-92 28 (b) (7) (B) 000-00 279-92 Purefoods Corporation Bo. San Roque, Marikina, Metro Manila Attention: Mr . Lito G . Go Grp . Manager-Legal Gentlemen : This refers to your letter dated 26 February 1992 requesting a ruling on whether the retirement benefits to be received by your retiring employee who is sixty years old and has rendered service for eight years, is exempt from income tax and consequently, from withholding tax. In reply, your Normal Retirement Plan provides that "any participant on the first day of the month coincident with or the next following his attainment of age 60 shall be retired and he shall be entitled to full normal retirement benefits." This provision of your Plan allows the retirement of an employee who may have served the company for even less than ten (10) years as long as he retires at age 60. In such a case, the benefits payable to the retiring member shall not be exempt from income tax because Republic Act No. 4917 (now Section 28 (b) (7) (A), Tax Code) requires the presence of two (2) conditions in order that the employee benefits may be granted tax exemptions: (1) the employee had been in service of the same private firm for at least ten (10) years; and (2) he is at least fifty (50) years old at the time of retirement. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue