1. On Retirement of Mr.

Nagasaka during pandemic 2020

(Relevant regulation: REVENUE REGULATIONS NO. 29-2020)

REVENUE REGULATIONS NO. 29-2020 issued on October 15, 2020 implements the

provisions of Republic Act No. 11494 (Bayanihan to Recover as One Act) relative to the tax
exemption of certain income payments.

The following income payments shall be excluded from gross income and shall not be subject to
Income Tax:
1. Retirement benefits received by officials and employees of private firms, whether individual
or corporate, from June 5, 2020 to December 31,2020, provided that the amount received is in
accordance with a retirement plan duly-registered with the BIR. Provided further, that any re-
employment of such official or employee in the same firm and its related parties as discussed
under Section 4 of Revenue Regulations (RR) No. 19-2020, within the succeeding twelve (12)-
month period shall be considered as proof of non-retirement. Note, however, that the
abovementioned conditions do not cover the retirement benefits of employees under Section
2.78.1(B)(1) of RR No. 02-98, as amended.

If the re-employment happens within calendar year 2020, the employer shall include the said
retirement benefits in the gross income of the concerned official or employee for 2020.

However, if the re-employment will occur in 2021 and within the twelve-month period, the
concerned employee shall pay the taxes due on the retirement benefits received within thirty
(30) days from date of re-employment, or on the due date for the payment of the second
installment payment of 2020 Income Tax, whichever comes later, without penalties.

OTHER FAQS:
Question 3. If the re-employment happens AFTER APRIL 15, 2021, but within the 12-month
period (TAXABLE retirement benefits), will the tax that shall be paid by employee in the
AITR to be filed be subject to penalties?
II. On Working after 65 years old, allowed?
As a general rule, NO.

“…but not beyond sixty-five (65) years which is hereby declared the compulsory retirement
age….” Article 302 Labor Code of the Philippines

Update in Philippine Setting:

Yes, under two circumstances:

(Cannot be contested by DOLE or other employees, provided not contrary to law, morals, public order,
and public policy.)

1. Under a Job Order or Contract of Service

Section 1, Rule XI of the Revised Omnibus Rules on Appointments and Other Personnel Actions
provides, as follows:

“Sec. 1. Contracts of Services/Job Orders, as distinguished from those covered under Sec. 2 (e)
and (f), RULE III of these Rules, need not be submitted to the Commission. Services rendered
there-under are not considered government services.

“Sec. 2. Contracts of Services/Job Orders refer to employment described as follows:

“a. The contract covers lump sum work or services such as janitorial, security or consultancy
services where no employer-employee relationship exist;

“b. The job order covers piece work or intermittent job of short duration not exceeding six
months on a daily basis;

“c. The contracts of services and job orders are not covered by Civil Service Law, Rules and
Regulations, but covered by COA rules;

“d. The employees involved in the contracts or job orders do not enjoy the benefits enjoyed by
government employees, such as PERA, COLA and RATA. (Emphasis Supplied)

It is clear from the foregoing rule that in cases of job order or contract of service, no
employer-employee relationship exists and therefore not considered as government service.
In this case, one could be hired after his retirement from the service as a job order or contract of
service. Thus, regardless of the passage of Republic Act 10911, one could still be hired after
his/her compulsory retirement from the service as a job order or contract of service.

In addition, the purpose of Republic Act 10911 is not merely to allow an employee who
has reached the compulsory retirement age of 65 to work as job order or contract of service but,
rather, to prohibit discrimination in employment on account of age and, eventually, to promote
equal opportunities in employment for everyone.
2. If he is also the owner (Self-Employed) of his own company

SSS Concerns: Retirement at 65 years old

 This is more commonly known as the compulsory retirement age. Here, it would be
more advisable for our retiring executive to wait and not to retire yet under SSS until he
is 65 years old. It is so because, for those retiring at age 65, the law (as it is worded) does
not require that he must be separated from employment, unlike those retiring at the age
of 60 where the law specifically declares that the retiree “is already separated from
employment or has ceased to be self-employed.”
 Considering that our executive who retires at 65 will not be required to separate himself
from his employment even after retiring under SSS, he will remain in full control of his
holdings in the company as its key officer. To put it simply, he enjoys his retirement
benefits while continuing to remain in his dream job.
 At any rate, the power to control his destiny still belongs to the retiring executive, as he
can still choose to retire whether he is 60 or 65. It would not really matter as long as he
enjoys not only his retirement benefits, but also all of his pleasant anticipations of what
his senior life might still have in store for him. What’s important is that he fully
understands his retirement rights, knows how to make the most out of his benefits, and
be empowered even as a retiree… if he chooses to.

Supplementary Reading

Title II RETIREMENT FROM THE SERVICE

ART. 302. Retirement. Any employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other applicable employment contract. In
case of retirement, the employee shall be entitled to receive such retirement benefits as he may
have earned under existing laws and any collective bargaining agreement and other
agreements: Provided, however, retirement benefits under any collective bargaining and other
agreements shall not be less than those provided therein. In the absence of a retirement plan or
agreement providing for retirement benefits of employees in the establishment, an employee
upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is
hereby declared the compulsory retirement age, who has served at least five (5) years in the
said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-
half (1/2) month salary for every year of service, a fraction of at least six (6) months being
considered as one whole year.