Publishing Section 29(b) of the National Internal Revenue Code of 1977 as promulgated by Presidential Decree No. 1158

August 5, 1977 REVENUE MEMORANDUM CIRCULAR NO. 39-77 SUBJECT : Publishing Section 29(b) of the National Internal Revenue Code of 1977 as promulgated by Presidential Decree No. 1158 TO : All Internal Revenue Officers and others concerned For the information and guidance of all internal revenue officers and others concerned, there is hereby quoted below, Section 29(b) of the National Internal Revenue Code of 1977 as promulgated by Presidential Decree No. 1158. "SEC. 29. Gross income . (a) General definitions . 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 "(7) Retirement benefits, pensions, gratuities, etc . "(A) Retirement benefits received by officials and employees of private firms, whether individual or corporate, in accordance with a reasonable private benefit plan maintained by the employer: Provided , That the retiring official or employee has been in the continuous service of the same employer for at least ten (10) years and is not less than fifty years of age at the time of his retirement: Provided, further , that the benefits granted under this act shall be availed of by an official or employee only once. For purposes of this sub-section, the term "reasonable private benefit plan" means a pension, gratuity, stock bonus or profit sharing plan maintained by an employer for the benefit of some or all of his officials or employees, wherein contributions are made by such employer for officials and employees, or both, for the purpose of distributing to such officials and employees the earnings and principal of the fund thus accumulated, and wherein it is provided in said plan that at no time shall any part of the corpus or income of the fund be used for, or be diverted to, any purpose other than for the exclusive benefit of the said officials and employees. "(B) Any amount received by an official and employee or by his heirs from the employer as a consequence of separation of such officials or employees from the service of the employer due to death, sickness or other physical disability or for any cause beyond the control of the said official or employee. "(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. aisa dc xxx xxx xxx "(9) Interest earned on commercial papers issued in the primary market as principal instruments subjected to the transactions tax under Section 210(b)." FEATURES OF THE AMENDMENT (1) The pertinent provisions of Republic Act 4917 are incorporated as subparagraph (A) and (B) of paragraph 7 of Section 29(b) of the Tax Code of 1977. This is to emphasize the fact that the exemption of retirement benefits received from Philippine sources is still governed by the said Republic Act. Corollary to this is the inclusion of a new provision which is subparagraph (C) of paragraph 7 of Section 29(b) exempting from income tax social security benefits, retirement gratuities, pensions and other similar benefits if they are received from foreign government agencies and other institutions, private or public. (2) Interest earned on commercial papers issued in the primary market as principal instrument subjected to the transactions tax under Section 210(b) is now excludible from gross income. EFFECTIVITY The above quoted Section took effect on June 3, 1977. ENFORCEMENT All internal revenue officers and others concerned are hereby enjoined to give this circular as wide a publicity as possible. aisa dc EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-P4519-F2828-A-8