Intercontinental Broadcasting Corp. vs. Noemi B. Amarilla, et al.
,
G.R. No. 162775, October 27, 2006
DOCTRINE
For retirement bene︎fits to be exempt from the withholding tax, the taxpayer
is burdened to prove the concurrence of the following elements: (1) a
reasonable private bene︎fit plan is maintained by the employer; (2) the
retiring o︎fficial or employee has been in the service of the same employer for
at least 10 years; (3) the retiring o︎fficial or employee is not less than 50
years of age at the time of his retirement; and (4) the benefit had been
availed of only once.
FACTS
4 employees retired from petitioner company and received on a staggered
basis their retirement benefits under the 1993 CBA. A P1,500 salary increase
was given to all employees of the company, current and retired, effective
July 1994. However, when the 4 retirees demanded theirs, petitioner refused
and instead informed them that their differentials would be used to offset
the tax due in their retirement benefits in accordance with the NIRC.
The 4 retirees filed separate complaints against IBC TV-13 Cebu and Station
Manager Cabanero for unfair labor practice and non-payment of backwages
before the NLRC. Complainants averred that their retirement benefits are
exempt from income tax under Art. 32 of the NIRC. Petitioner claims that
respondents are liable for taxes on their retirement bene︎fits because the
retirement plan under the CBA was not approved by the BIR. It insisted that
it failed to comply with the requisites of Section 32 of the NIRC and Rule II,
Section 6 of the Rules Implementing the New Retirement Law which provides
that retirement pay shall be tax exempt upon compliance with the
requirements under Section 2(b) of Revenue Regulations No. 12-86 dated
August 1, 1986.
ISSUES
1. WON the retirement benefits of respondents are part of their gross
income and hence, taxable.
2. WON petitioner, as employer, is obliged to withhold the taxes on said
benefits and remit the same to the BIR.
RULING
1. YES.
Section 28(b)(7)(A) of the 1986 NIRC provides for exclusion on gross
income, such as retirement benefits, pensions, gratuities, etc. Revenue
Regulations No. 12-86 provides for the requirements which will exclude
pensions, retirement, and separation from being subjected to withholding
taxes. Thus, for the retirement bene︎fits to be exempt from the withholding
tax, the taxpayer is burdened to prove the concurrence of the following
elements: (1) a reasonable private bene︎fit plan is maintained by the
employer; (2) the retiring o︎fficial or employee has been in the service of the
same employer for at least 10 years; (3) the retiring o︎fficial or employee is
not less than 50 years of age at the time of his retirement; and (4) the
benefit had been availed of only once.
In the case at bar, there is no evidence on record that the 1993 CBA had
been approved or was ever presented to the BIR; hence, the retirement
benefits of respondents are taxable.
2. YES, but they are estopped from doing so.
Under Section 80 of the NIRC, petitioner, as employer, was obliged to
withhold the taxes on said retirement benefits and remit the same to the
BIR.
However, we agree with respondents' contention that petitioner did not
withhold the taxes due on their retirement bene︎fits because it had obliged
itself to pay the taxes due thereon. This was done to induce respondents to
agree to avail of the optional retirement scheme.
An agreement to pay the taxes on the retirement bene︎fits as an incentive to
prospective retirees and for them to avail of the optional retirement scheme
is not contrary to law or to public morals. Petitioner had agreed to shoulder
such taxes to entice them to voluntarily retire early, on its belief that this
would prove advantageous to it. Respondents agreed and relied on the
commitment of petitioner. For petitioner to renege on its contract with
respondents simply because its new management had found the same
disadvantageous would amount to a breach of contract.
