RMC No. 120-2020: Further clarifies the retirement benefits exempt from Income Tax pursuant to RA No. 11494 (Bayanihan to Recover as One Act) as implemented under RR No. 29-2020

Key points

1. What is a registered retirement plan. It is a plan issued a Certificate of Qualification as a Reasonable Employees’ Retirement Benefit Plan, which the BIR issues once conditions and requirements are met.
2. Exempt amount. Only the amount covered by the registered plan is exempt, provided the retirement and the receipt of benefits fall within the covered period. Any amount beyond the plan is taxable.
3. Retirement Pay Law. Under Section 32 (B) (6) of the Tax Code, retirement benefits under RA No. 7641 are not included in gross income. Without a plan or agreement, an employee aged sixty (60) years or more but not beyond sixty-five (65), with at least five (5) years of service, may retire.
4. Lists of recipients. RR No. 29-2020 requires a list of recipients of retirement benefits and other exempt income payments made from June 5 to December 31, 2020. Those employees remain in the Annual Alphabetical List of Employees due on or before January 31 each year.

Who is affected

• Employees of private firms who received retirement benefits
• Employers

Deadlines and effectivity

• Retirement benefits received June 5, 2020 to December 31, 2020
• Annual Alphabetical List due on or before January 31 each year