Bureau of Internal Revenue

The Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 120-2020, 30 October 2020, to further clarify the retirement benefits (“RB”) exemption from income tax given to employees of private firms from 5 June 2020 to 31 December 2020 (“covered period”) under the Bayanihan to Recover as One Act.

The following are the salient points of the RMC:

• RB received under a registered retirement plan, even if it lacks one of the conditions such as length of service, are exempt from income tax, provided that the date of resignation and receipt of the RB is within the covered period.

• Re-employment within the twelve-month period succeeding the date of retirement will make the RB subject to income tax.

• RB received from a company which has no BIR-registered retirement plan are subject to income tax. The exception is when RB are given pursuant to Republic Act No. 7641 and in compliance with the provisions therein.

• A retirement plan is duly registered with the BIR when it has a Certificate of Qualification as a Reasonable Employees’ RB Plan.

• RB given in excess of what is within the BIR-registered RB plan are subject to income tax even if the retirement and receipt of the RB is within the covered period.

• Notwithstanding Revenue Regulations No. 29-2020’s requirement to submit the list of recipients of income payments exempt from income tax, the list of recipients of exempt RB from the covered period must be included in the Annual Alphabetical List which shall reflect income received by the said employees for the year, inclusive of RB and other income payments.

Attached is the full text of the issuance.

Revenue Memorandum Circular No. 120-2020