Solon seeks to exempt from tax retirement pay of workers 45 yrs. and older

A lawmaker has proposed to legislate and exempt from tax the retirement pay of officials and employees who are aged 45 and have worked with the same employer for at least 10 years.

House Bill 4704 filed by Bacolod City Rep. Evelio Leonardia would amend Section 32 (B) (6) (a) of Republic Act 8424, otherwise known as the National Internal Revenue Code of 1997, as amended, so the retirement benefits employees receive under RA 7641 or the Retirement Pay Law and from private companies, whether individual or corporate, will be tax-exempt.

The retiring official or employee should have been in the service of the same employer for at least 10 years and should not be less than 45 years old for his or her retirement benefits to qualify under the measure.

'Ironically'

The same exclusion from gross income will also apply to the retiree who subsequently gets employed for another 10 years or more by private companies, whether individual or corporate, or with government firms with a benefit or retirement plan.

The bill defines a “reasonable private benefit plan” as “a pension, gratuity, stock bonus or profit-sharing plan maintained by an employer for the officials or employees, wherein contributions are made by such employer for the officials or employees, or both, for the purpose of distributing to such officials or 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.”

In the bill’s explanatory note, Leonardia said employees who wish to retire at an early age to work for another employer for purposes of career advancement often end up not leaving the company because their retirement pay will be taxed

“The retirement pay for the second time past the age of 50 years old becomes taxable when, ironically, the older the person gets… his life’s burden [should] not be too [much] for him,” he said.

The bill is pending before the House Ways and Means committee. – Xianne Arcangel/VS, GMA News