BIR Ruling No. 374-11

October 14, 2011 BIR RULING NO. 374-11 Section 32 (B) (6) (c) of the Tax Code of 1997; BIR Ruling No. 295-93; BIR Ruling No. UN-069-95; BIR Ruling No. DA-380-07 Atty. Concepcion M. Juatas 31 Aguirre Ave. BF Homes Paraaque City Gentlemen : This refers to your letter dated February 8, 2011, requesting on behalf of your client, Adoracion Y. Baelum, for a ruling that retirement pension of Retirees or of their surviving spouse as beneficiary after death of Pensioner is tax exempt under Philippine Law. It is represented that Adoracion Y. Baelum with Taxpayer's Identification No. 405-075-913-000 is the surviving spouse of late Mogens Lausen Baelum, a national of Denmark died on December 28, 2010, leaving her as beneficiary of 50% of his life pension. Under Denmark Law, a current pension will be subject to personal income tax. However, if the beneficiary lives outside Denmark, other rules apply. Based on the foregoing, you now request for confirmation of your opinion that the benefits that will be received by Adoracion Y. Baelum is not subject to tax. In reply thereto, please be informed that Section 32 (B) (6) (c) of the Tax Code of 1997, as amended, provides, to wit: "SEC. 32. Gross Income. xxx xxx xxx (B) Exclusions from Gross Income. The following items shall not be included in gross income and shall be exempt from taxation under this title: xxx xxx xxx (6) Retirement Benefits, Pensions, Gratuities, etc. xxx xxx xxx (c) The provisions of any existing law to the contrary notwithstanding, social security benefits, retirement gratuities, pensions and other similar benefits received by resident or nonresident citizens of the Philippines or aliens who come to reside permanently in the Philippines from foreign government agencies and other institutions, private or public." ITScHa From the aforequoted provisions of the Tax Code of 1997, as amended, it is clear that pensions received by resident or non-resident citizens of the Philippines are excluded from the gross income and shall be exempt from taxation. This Office had the occasion to rule on the matter in BIR Ruling No. 295-93 dated July 8, 1993, as follows: "In reply thereto, please be informed that pursuant to Section 28 (b) (7) (c) of the Tax Code, as amended, [now Section 32 (B) (6) (c)], social security benefits, retirement gratuities, pensions and other similar benefits received by resident or nonresident citizens of the Philippines or aliens who come to reside permanently in the Philippines from foreign government agencies and other institutions, private or public SHALL NOT BE INCLUDED IN THE GROSS INCOME. Such being the case, pensions received by retired Filipino personnel of the United Nations and other international organizations like ILO, WHO, IOM, are exempt from the Philippine income tax." Thus, this Office hereby confirms your opinion that the pensions that will be received by Adoracion Y. Baelum is excluded from the gross income and consequently shall be exempt from individual income tax. (BIR Ruling No. UN-069-95 dated February 15, 1995 and BIR Ruling No. DA-380-07 dated July 12, 2007) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it shall be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue