Category: LEGAL NOTES


Outlook
NAIA 3: a cautionary tale 

By Rigoberto D. Tiglao
Philippine Daily Inquirer
First Posted 05:35:00 01/13/2011

Filed Under: Government Contracts, Graft & Corruption

Most Read

THE QUAGMIRE of the Ninoy Aquino International Airport Terminal 3—which would have been our main gateway to the world—is a cautionary tale of an epic scale for our country. It dramatizes questions of paramount importance for our country and, perhaps, for many developing countries as well:

Which should take precedence in terms of state policy and action: the anti-corruption value or realpolitik? Should, or can a compromise be reached between these two different guides to action?

It’s amazing how many have so easily forgotten why the NAIA 3 contract of the Philippine International Airport Terminals Corp. (PIATCo), a consortium dominated by an obscure Chinese-Filipino firm and the German Fraport AG, was aborted.

Next to the tobacco excise tax issue and the BW Resources stock-manipulation case, the NAIA 3 in 2001 appeared to be the biggest case of corruption under the Estrada administration and even, purportedly, the first instance of corruption by officials of the new Arroyo administration. While the contract to build NAIA 3 was completed during the administration of President Fidel Ramos, the Estrada administration amended it in ways that allegedly gave PIATCo much bigger revenues.

Among these changes: for PIATCo to collect terminal fees in US dollars while remitting government share in pesos, which would allow PIATCo to profit from the local currency’s depreciation; the state’s effective guarantee on PIATCo’s loans, making it a risk-free borrower; and the scrapping of PIATCo’s obligation to build underground tunnels to connect the three terminals, which would have cost it P700 million.

What was suspicious about the PIATCo contract was its huge, so-called “soft costs,” that is, costs that were not for construction but for the other alleged requirements of the project such as regulatory approvals—for instance, $4 million paid to a shadowy company Datacenta to get the terminal designated as an export zone. What became a favorite coffee-shop topic was the mysterious Afredo Liongson, a former drug salesman, who got a $200,000 monthly retainer plus $2 million for “public relations” expenses, including such costs as $250,000 for the support of a small government agency. Rumors circulated that PIATCo was able to quickly involve in their project powerful personalities in the new government of President Gloria Macapagal-Arroyo.

Ms Arroyo called several meetings of her top officials and advisers to get their views on the PIATCo issue. These turned out to be very heated, even emotional debates. One faction argued that it was Arroyo’s obligation, especially since she assumed power basically through an anti-corruption revolt, to stop the contract. “Madame President, it is your moral duty to stop this contract,” one of her respected senior Cabinet officials once solemnly said in a meeting.

The other faction, composed of “pragmatists,” argued that the project was 97 percent completed, and that there was no stopping it since opening a modern terminal was crucial in attracting more tourists and foreign investors. Another realpolitik argument was: since the project involved not only a German firm but Japanese construction firms, to scuttle the contract would frighten off foreign investors who would see the country as one which does not honor obligations made by a previous administration. However, the country’s top five taipans who were originally asked by President Ramos to undertake the project, especially Lucio Tan, were all up in arms against PIATCo, and obviously mobilized their media assets to portray the contract as grossly unfair to government.

Arroyo ordered in 2002 first Solicitor General Alfredo Benipayo, and then the feisty presidential adviser for flagship projects Gloria Tan-Climaco to study the case. Both had the same conclusion: the PIATCo contract was so riddled with corruption that it had to be declared null and void. The Senate undertook its own investigation and reached the same conclusions.

In December 2002, and on the basis of the solicitor general’s official position, President Arroyo announced that as the country’s chief executive, she had to cancel a contract disadvantageous to government and acquired through graft.

Her stand was vindicated in May 2003 when the Supreme Court ruled the contract null and void on two grounds: First, that the Filipino proponent had no financial capacity to undertake the project; and second, that the changes in the contract were undertaken during the Estrada administration in violation of the legal requirements for such amendments. A lower court had also found PIATCo in violation of the anti-dummy law, as the Fraport emerged as the chief financier of the project.

It seemed a morality tale at that time, the victory of good versus evil.

But then amoral reality kicked in: the reality of the powerful government of the third largest economy in the world, Germany, obligated to defend its companies right or wrong, especially since Fraport is majority-owned by two state entities; the labyrinthine, expensive world of international law; the technicalities of the Philippine legal system; and of course the reality of the country’s best lawyers and even former government officials seeing the case as a lucrative source of income, and hence coming to PIATCo’s defense.

Eight years after it was scheduled to open, NAIA 3 is only partly operating and limited to certain domestic flights, while our operating international terminal is a national embarrassment. International lawyers’ fees and other related expenses in the meantime have cost, by one reckoning, over P1 billion.

It is not only a cautionary tale on the risks of an anti-corruption crusade, but a national tragedy as well.

SOURCE: FEDERICO SORIANO, CIPRIANO BAUTISTA, JOSE TORALBA, CILODONIO TANTAY, MARIANO BRAVO, ROLANDO TORALBA, FAUSTINO BRAVO, CRISTINA TORALBA, BENJAMIN LACAYANGA, ROSALIA TANTAY, GABRIEL DELA VEGA, ROGELIO BRAVO, and ROMEO TANTAY, represented by their Attorney-in-Fact, TEODORICO GAMBA vs. ANA SHARI B. BRAVO, REBECCA BENITO, JOHN MEJIA, MILA BRAVO, BENITO BRAVO, ERNESTO BRAVO, JOSE ISRAEL BRAVO, JUANA BRAVO, DARAB CENTRAL, and the HON. COURT OF APPEALS, FORMER FIFTH DIVISION (G.R. NO. 152086, 15 DECEMBER 2010, J. LEONARDO DE CASTRO)

 

JURISDICTION OF DARAB AS DISTINGUISHED FROM JURISDICTION OF DAR (EXHAUSTIVE DISCUSSION):

Section 50 of the CARL bestows upon the DAR quasi-judicial powers:

SEC. 50.  Quasi-Judicial Powers of the DAR.  –  The DAR is hereby vested with primary jurisdiction to determine and adjudicate agrarian reform matters and shall have exclusive original jurisdiction over all matters involving the implementation of agrarian reform, except those falling under the exclusive jurisdiction of the Department of Agriculture (DA) and the Department of Environment and Natural Resources (DENR).

In Sta. Rosa Realty Development Corporation v. Amante,[1][20] the Court pointed out that the jurisdiction of the DAR under the aforequoted provision is two-fold.  The first is essentially executive and pertains to the enforcement and administration of the laws, carrying them into practical operation and enforcing their due observance, while the second is judicial and involves the determination of rights and obligations of the parties. 

Jurisdiction over agrarian disputes lies with the DARAB.  Section 3(d) of the CARL defines an agrarian dispute as follows:

(d)      Agrarian dispute refers to any controversy relating to tenurial arrangements, whether leasehold, tenancy, stewardship or otherwise, over lands devoted to agriculture, including disputes concerning farmworkers associations or representation of persons in negotiating, fixing, maintaining, changing or seeking to arrange terms or conditions of such tenurial arrangements.

It includes any controversy relating to compensation of lands acquired under this Act and other terms and conditions of transfer of ownership from landowners to farmworkers, tenants and other agrarian reform beneficiaries, whether the disputants stand in the proximate relation of farm operator and beneficiary, landowner and tenant, or lessor and lessee. (Emphasis supplied.)

At the time the present controversy arose, the conduct of proceedings before the Board and its adjudicators were governed by the DARAB New Rules of Procedures, which were adopted and promulgated on May 30, 1994, and came into effect on June 21, 1994 after publication (1994 DARAB Rules).[2][21]  The 1994 DARAB Rules identified the cases over which the DARAB shall have jurisdiction, viz:

RULE II

JURISDICTION OF THE ADJUDICATION BOARD

SECTION 1.  Primary and Exclusive Original and Appellate Jurisdiction.  –  The Board shall have primary and exclusive jurisdiction, both original and appellate, to determine and adjudicate all agrarian disputes involving the implementation of the Comprehensive Agrarian Reform Program (CARP) under Republic Act No. 6657, Executive Order Nos. 228, and 129-A, Republic Act No. 3844 as amended by Republic Act No. 6389, Presidential Decree No. 27 and other agrarian laws and their implementing rules and regulations.  Specifically, such jurisdiction shall include but not be limited to cases involving the following:

a)       The rights and obligations of persons, whether natural or juridical, engaged in the management, cultivation and use of all agricultural lands covered by the CARP and other agrarian laws;

b)       The valuation of land, and the preliminary determination and payment of just compensation, fixing and collection of lease rentals, disturbance compensation, amortization payments, and similar disputes concerning the functions of the Land Bank of the Philippines (LBP);

c)       The annulment or cancellation of lease contracts or deeds of sale or their amendments involving lands under the administration and disposition of the DAR or LBP;

d)       Those case arising from, or connected with membership or representation in compact farms, farmers’ cooperatives and other registered farmers’ associations or organizations, related to lands covered by the CARP and other agrarian laws;

e)       Those involving the sale, alienation, mortgage, foreclosure, pre-emption and redemption of agricultural lands under the coverage of the CARP or other agrarian laws;

f)        Those involving the issuance, correction and cancellation of Certificates of Land Ownership Award (CLOAs) and Emancipation Patents (EPs) which are registered with the Land Registration Authority;

g)       Those cases previously falling under the original and exclusive jurisdiction of the defunct Court of Agrarian Relations under Section 12 of Presidential No. 946, except sub-paragraph (Q) thereof and Presidential Decree No. 815.

It is understood that the aforementioned cases, complaints or petitions were filed with the DARAB after August 29, 1987.

Matters involving strictly the administrative implementation of Republic Act No. 6657, otherwise known as the Comprehensive Agrarian Reform Law (CARP) of 1988 and other agrarian laws as enunciated by pertinent rules shall be the exclusive prerogative of and cognizable by the Secretary of the DAR.

h)      And such other agrarian cases, disputes, matters or concerns referred to it by the Secretary of the DAR. (Emphasis supplied.)        

SECTION 2.  Jurisdiction of the Regional and Provincial Adjudicator. – The RARAD and the PARAD shall have concurrent original jurisdiction with the Board to hear, determine and adjudicate all agrarian cases and disputes, and incidents in connection therewith, arising within their assigned territorial jurisdiction.

On the other hand, cases involving agrarian law implementation fall within the jurisdiction of the DAR Secretary.  DAR Administrative Order No. 6, series of 2000, otherwise known as the Rules of Procedure for Agrarian Law Implementation (ALI) Cases, were promulgated only on August 30, 2000, and became effective on September 15, 2000 after publication (2000 Rules for ALI Cases).[3][22]  Rule I, Section 2 of said Rules delineates the jurisdiction of the DAR Secretary, thus:

SEC. 2.  Cases Covered – These Rules shall govern cases falling within the exclusive jurisdiction of the DAR Secretary which shall include the following:

(a)      Classification and identification of landholdings for coverage under the Comprehensive Agrarian Reform Program (CARP), including protests or oppositions thereto and petitions for lifting of coverage;

(b)      Identification, qualification or disqualification of potential farmer-beneficiaries;

(c)      Subdivision surveys of lands under CARP;

(d)      Issuance, recall or cancellation of Certificates of Land Transfer (CLTs) and CARP Beneficiary Certificates (CBCs) in cases outside the purview of Presidential Decree (PD) No. 816, including the issuance, recall or cancellation of Emancipation Patents (EPs) or Certificates of Land Ownership Awards (CLOAs) not yet registered with the Register of Deeds;

(e)                Exercise of the right of retention by landowner;

(f)       Application for exemption under Section 10 of RA 6657 as implemented by DAR Administrative Order No. 13 (1990);

(g)      Application for exemption pursuant to Department of Justice (DOJ) Opinion No. 44 (1990) as implemented by DAR Administrative Order No. 6 (1994);

(h)     Application for exemption under DAR Administrative Order No. 9 (1993);

(i)       Application for exemption under Section 1 of RA 7881, as implemented by DAR Administrative Order No. 3 (1995);

(j)       Issuance of certificate of exemption for lands subject of Voluntary Offer to Sell (VOS) and Compulsory Acquisition (CA) found unsuitable for agricultural purposes pursuant to DAR Memorandum Circular No. 34 (1997);

(k)      Application for conversion of agricultural lands to residential, commercial, industrial or other non-agricultural uses including protests or oppositions thereto;

(l)       Right of agrarian reform beneficiaries to homelots;

(m)     Disposition of excess area of the farmer-beneficiary’s landholdings;

(n)     Transfer, surrender or abandonment by the farmer-beneficiary of his farmholding and its disposition;

(o)      Increase of awarded area by the farmer-beneficiary;

(p)      Conflict of claims in landed estates and settlements; and

(q)      Such other matters not mentioned above but strictly involving the administrative implementation of RA 6657 and other agrarian laws, rules and regulations as determined by the Secretary.

Rule I, Section 3 of the 2000 Rules for ALI Cases explicitly excludes from the application thereof cases that fall within the exclusive original jurisdiction of the DARAB.

In determining whether the DARAB or the DAR Secretary had jurisdiction over the subject matter of DARAB Case Nos. 01-689 to 710-WP-’95, the Court adverts to the following rules on jurisdiction which it had established in Heirs of Julian dela Cruz and Leonora Talaro v. Heirs of Alberto Cruz[4][23]:

It is axiomatic that the jurisdiction of a tribunal, including a quasi-judicial officer or government agency, over the nature and subject matter of a petition or complaint is determined by the material allegations therein and the character of the relief prayed for, irrespective of whether the petitioner or complainant is entitled to any or all such reliefs.  Jurisdiction over the nature and subject matter of an action is conferred by the Constitution and the law, and not by the consent or waiver of the parties where the court otherwise would have no jurisdiction over the nature or subject matter of the action.  Nor can it be acquired through, or waived by, any act or omission of the parties.  Moreover, estoppel does not apply to confer jurisdiction to a tribunal that has none over the cause of action.   The failure of the parties to challenge the jurisdiction of the DARAB does not prevent the court from addressing the issue, especially where the DARAB’s lack of jurisdiction is apparent on the face of the complaint or petition.

Indeed, the jurisdiction of the court or tribunal is not affected by the defenses or theories set up by the defendant or respondent in his answer or motion to dismiss.  Jurisdiction should be determined by considering not only the status or the relationship of the parties but also the nature of the issues or questions that is the subject of the controversy.  If the issues between the parties are intertwined with the resolution of an issue within the exclusive jurisdiction of the DARAB, such dispute must be addressed and resolved by the DARAB.  The proceedings before a court or tribunal without jurisdiction, including its decision, are null and void, hence, susceptible to direct and collateral attacks.[5][24]

Guided accordingly by the foregoing jurisprudence, the Court turns to respondents’ Complaint before the DARAB, wherein they alleged: 

2.       That the [herein respondents] are the owners of less than five (5) hectares each of the 26 hectares of land located at barangays Tomling and Nalsian, Malasiqui, Pangasinan, x x x.

3.       That of the aforesaid 26 hectares of land, only about 6 hectares are tenanted by seven agricultural [lessees] namely defendants Gervacio Sergote, Anacleto Torralba, Saturnino Idos, Faustino Bravo, Mariano Bravo, Teofilo Tantay, Idelfonso Tantay and Pelagio Tantay;

4.       That 20 hectares portion of the said 26 hectares is not tenanted and although it is planted to 456 mango trees, the areas in between the rows of mango trees have never been cultivated and planted to any crop;

x x x x

6.       That the [respondents] have decided to relocate the St. Martin’s Pharmaceuticals, Inc. and to construct a BRAVO AGRO-INDUSTRIAL COMPLEX in the untenanted portions of the land in question x x x;

7.       That in accordance with the relocation and development plans of the St. Martin’s Pharmaceuticals, Inc. and the construction of the BRAVO AGRO-INDUSTRIAL COMPLEX, [respondents] and the defendants Teofilo Tantay, Celestino Manipon, Romeo Tantay, Gabriel dela Vega, Mariano Bravo, Cristina Torralba, Mauricio Rubio, Salvador Bautista, Faustino Bravo, Federico Soriano, Josefina Gutierrez, and Saturnino Idos executed their “Compromise Agreement” dated November 3, 1992 which provides for the relocation and transfer of their houses to a homelot of 240 square meters each within the land in question for them and their family to conveniently enjoy the benefits to be provided by the complex;

8.       That the relocation of said defendants’ houses will not affect in any manner the security of tenure of the tenants on the riceland portion of the land in question;

9.       That in 1993, the [respondents], relying on the compromise agreement they have with the defendants, started the implementation of their aforestated projects by strategically placing the “BRAVO AGRO-INDUSTRIAL COMPLEX” sign board in the land in question and started making the needed concrete hollow blocks;

x x x x

11.     Specific Performance.  That the defendants in violation of their compromise agreement and on the instigation of a cult leader refused to comply with their compromise agreement;

12.     That instead of transferring and relocating their respective houses, the said defendants illegally demanded of the Municipal Agrarian Reform Officer of Malasiqui, Pangasinan, for the compulsory coverage of the land in question under the OLT program of the government under Pres. Decree No. 27 and Rep. Act. 6657 otherwise known as the Comprehensive Agrarian Reform Law of 1988;

13.     That because the land in question is not coverable under the OLT provisions of P.D. No. 27 and R.A. No. 6657 as the sellers from whom the [respondents] acquired the lands in question did not have five (5) hectares each and the latter likewise did not have five (5) hectares each, the Municipal Agrarian Reform Officer of Malasiqui, Pangasinan did not place the lands in question under the coverage of the OLT program under P.D. No. 27 nor under R.A. No. 6657;

x x x x

16.     COLLECTION OF UNPAID RENTALS.  That since the year 1992, the defendants have deliberately refused and still refuse to pay the lease rentals of their respective tillage on the riceland portions of the land in question;

 

x x x x

29.     That the defendants, in their illegal desire to convert the untenanted portions of the land in question as parts of their tillage, have unlawfully started plowing the untenanted surrounding areas and the areas in between the rows of mango fruit bearing trees in the mango orchard portion of the land in question.[6][25]

In sum, the material allegations in respondents’ Complaint are: (1) that several of the defendants are the agricultural tenants/lessees of respondents’ rice lands; (2) that the defendants entered into a Compromise Agreement with respondents in which the former agreed to give up portions of the subject properties they were tilling in exchange for home lots also located on the subject properties; (3) that the Compromise Agreement shall not affect defendants’ security of tenure; (4) that instigated by a cult leader, defendants refused to comply with the Compromise Agreement and, instead, demanded from the MARO that the subject properties be compulsorily placed under the land transfer program of the Government;  (5) that the defendants have also refused to pay rent for the portion of the rice lands they were tilling; and (6) that the defendants have also begun cultivating portions of the subject properties which are untenanted and planted with mango trees.  Based on these allegations, respondents sought the following reliefs:

WHEREFORE, it is most respectfully prayed that an injunction order be issued against the defendants restraining them from performing farmworks on the non riceland portion of the land in question and restraining them from harvesting mango fruits from the mango trees in the mango orchard portion of the land in question and after due hearing judgment issue:

1.                  Ejecting the defendants from the land in question;

2.                  Ordering the defendants jointly and solidarily liable to [herein respondents’] attorneys to be proved hereinafter and pay [respondents] P500,000.00 moral damages and P500,00.00 Exemplary damages and P500,000.00 actual damages.

3.                  Ordering the defendants to pay the deliberately unpaid rentals of the lands in question since 1992 up to the present.

4.                  Making permanent the injunction order against the defendants;

5.                  Granting such other reliefs and remedies just and equitable in favor of the [respondents] under the premises.[7][26]

The material allegations and reliefs sought in respondents’ Complaint essentially established a case involving the rights and obligations of respondents and defendants as landlords and agricultural tenants/lessees, respectively, taking into account their Compromise Agreement; as well as the fixing and collection of lease rentals.  The DARAB properly took cognizance of the case as it constituted agrarian disputes, well-within the jurisdiction of the DARAB under Rule II, Section 1, paragraphs (a) and (b) of the 1994 DARAB Rules. 

Moreover, even when respondents alleged in their Complaint that the subject properties are not subject to the OLT program under the Tenants Emancipation Decree and the CARL because each of the respondents does not own more than five hectares, said allegation was not fundamental in establishing respondents’ causes of action against defendants.  In fact, it was defendants who explicitly raised and discussed in their Position Paper before the DARAB the issue of whether the subject properties are covered by the Tenants Emancipation Decree and the CARL.[8][27]  As part of their defense, defendants claimed that all of the subject properties, with a total area of 26 hectares,[9][28] are actually owned by respondent Ernesto S. Bravo alone, and are tenanted and planted with rice, corn, bananas, and root crops.  They argued that under the Tenants Emancipation Decree, tenanted rice and corn lands in excess of the seven hectares a landowner is allowed to retain shall be awarded to the tenant-farmers. 

It bears to reiterate that jurisdiction over the nature of the action cannot be made to depend upon the defenses set up in the court or upon a motion to dismiss for, otherwise, the question of jurisdiction would depend almost entirely on the defendant.  Once jurisdiction is vested, the same is retained up to the end of the litigation.[10][29]  Therefore, the DARAB was only exercising the jurisdiction vested upon it over DARAB Case Nos. 01-689 to 710-WP-’95 when it directly addressed the issue raised by defendants themselves, and adjudged that the subject properties are not subject to the OLT program under the Tenants Emancipation Decree and the CARL since respondents each owned an area well-within the retention limits allowed landowners by said agrarian laws.     

        Incidentally, the DARAB also took into consideration and only stayed consistent with an earlier finding by the MARO that the subject properties are not within the coverage of the OLT program of the Government.  And while it is true that the MARO’s ruling may still be appealed to higher DAR officials, petitioners failed to present any proof that such appeal had indeed been taken or that the said ruling had already been reversed.


[1][20]          493 Phil. 570, 606 (2005).

[2][21]          The 1994 DARAB Rules were published in the Philippine Times Journal and the Philippine Star on June 6, 1994.  They became effective 15 days thereafter.  Said Rules were subsequently repealed/modified by the 2003 DARAB Rules and then the 2009 DARAB Rules.

[3][22]          The 2000 Rules for ALI Cases were published in The Philippine Star and The Malaya on August 30, 2000.  They became effective 10 days thereafter.  Said Rules were subsequently modified/repealed by DAR Administrative Order No. 3, series of 2003, otherwise known as the 2003 Rules of Procedure for ALI Cases. 

[4][23]          G.R. No. 162980, November 22, 2005, 475 SCRA 743.

[5][24]          Id. at 755-757.

[6][25]          DAR records, pp. 3-7.

[7][26]          Id. at 2.

[8][27]          Id. at. 208-210.

[9][28]          The total land area of the subject properties actually measures only 24.5962 hectares.

[10][29]         Heirs of Rafael Magpily v. De Jesus, 511 Phil. 14, 21 (2005).

WHEN RETIREMENT BENEFITS ARE EXEMPT FROM TAX

 

(PLEASE SEE ALSO LEGAL NOTE 0006: RETIREMENT BENEFITS IN THE PRIVATE SECTOR)

 

ARE RETIREMENT BENEFITS SUBJECT TO TAX?

 

No, under certain conditions. These conditions are:

 

(i) There must be a reasonable private benefit plan and such benefit plan  must be approved by the Bureau of Internal Revenue;

 

(ii) The retiring official or employees must have been in the service of the same employer for at least ten (10) years and is not less than fifty (50) years of age at the time of retirement; and

 

(iii) The retiring official or employee shall not have previously availed of the privilege under the retirement benefit plan of the same or another employer.

 

Read case below:

 

G.R. No. 162775             October 27, 2006

INTERCONTINENTAL BROADCASTING CORPORATION (IBC), represented by ATTY. RENATOQ. BELLO, in his capacity as CEO and President, petitioner,
vs.
NOEMI B. AMARILLA, CORSINI R. LAGAHIT, ANATOLIO G. OTADOY, and CANDIDO C. QUIÑONES, JR., respondents.

 

XXXXXXXXXXXX

 

Revenue Regulation No. 12-86, the implementing rules of the foregoing provisions, provides:

 

(b) Pensions, retirements and separation pay. – Pensions, retirement and separation pay constitute compensation subject to withholding tax, except the following:

 

(1) Retirement benefit received by official and employees of private firms under a reasonable private benefit plan maintained by the employer, if the following requirements are met:

 

(i) The retirement plan must be approved by the Bureau of Internal Revenue;

 

(ii) The retiring official or employees must have been in the service of the same employer for at least ten (10) years and is not less than fifty (50) years of age at the time of retirement; and

 

(iii) The retiring official or employee shall not have previously availed of the privilege under the retirement benefit plan of the same or another employer.

 

Thus, for the retirement benefits to be exempt from the withholding tax, the taxpayer is burdened to prove the concurrence of the following elements: (1) a reasonable private benefit plan is maintained by the employer; (2) the retiring official or employee has been in the service of the same employer for at least 10 years; (3) the retiring official 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.

 

WHAT IS THE LEGAL BASIS FOR EXEMPTING RETIREMENT BENEFITS FROM TAX?

 

RA 4917:  AN ACT PROVIDING THAT RETIREMENT BENEFITS OF EMPLOYEES OF PRIVATE FIRMS SHALL NOT BE SUBJECT TO ATTACHMENT, LEVY, EXECUTION, OR ANY TAX WHATSOEVER (17 JUNE 1967)

Sec. 1.   Any provision of law to the contrary notwithstanding, the 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 shall be exempt from all taxes and shall not be liable to attachment, garnishment, levy or seizure by or under any legal or equitable process whatsoever except to pay a debt of the official or employee concerned to the private benefit plan or that arising from liability imposed in a criminal action: Provided, That the retiring official or employee has been in the 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: Provided, finally, That in case of separation of an official or employee 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, any amount received by him or by his heirs from the employer as a consequence of such separation shall likewise be exempt as hereinabove provided.

As used in this Act, 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 and employees, wherein contributions are made by such employer or 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.

Sec. 2.   This Act shall take effect upon its approval.

Approved: June 17, 1967

 

SUPPOSE AN EMPLOYEE IS SEPARATED FROM THE SERVICE FOR A CAUSE BEYOND HIS CONTROL, IS HIS SEPARATION PAY SUBJECT TO TAX?

 

No. As provided under R.A. 4917:

 

Provided, finally, That in case of separation of an official or employee 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, any amount received by him or by his heirs from the employer as a consequence of such separation shall likewise be exempt as hereinabove provided.