Revenue Regulations No. 15-2025: Revised Private Retirement Benefit Plan Regulations

On 29 April 2025, the Bureau of Internal Revenue (“BIR”) issued Revenue Regulations (“RR”) No. 15-2025 or the Revised Private Retirement Benefit Plan Regulations to revise policies and guidelines on the taxability of retirement benefits received by employees under a reasonable private retirement benefit plan.

For this purpose, a private retirement benefit plan shall refer to an agreement whereby an employer provides benefits to its officials and employees upon the latter’s retirement. It may consist of a pension, gratuity, provident fund, stock bonus or profit-sharing plan, or any other similar plan maintained by an employer for the benefit of some or all of its officials and employees, wherein contributions are made by such employer or officials and employees, or both.

Tax Incentives or Privileges

A qualified retirement plan is entitled to the following tax incentives or privileges:

1. Exemption from income and withholding tax of the retirement benefits and all amounts received by officials and employees of private firms on account of their retirement

2. Exemption from income and withholding tax of the trust income from various investments made by the trustees of an employer’s trust under Section 60(b) of the Tax Code. The income from investment in shares of stocks listed and traded in the local stock exchange, however, shall be subject to stock transaction tax.

3. Tax deductibility of the following contributions made by employers from its gross income:
   1. Contributions to the trust during the taxable year to cover the pension of the liability accrued during that year (“Normal Cost”)
   2. Contributions to the trust during the taxable year in excess of the Normal Cost but only if such amount (i) has not theretofore been allowed as a deduction, and (ii) is apportioned in equal parts over a period of ten (10) consecutive years beginning with the year in which the transfer of payment is made.

In order to avail of the above tax incentives/privileges, the following requirements must be met:

1. The Retirement Plan must be reasonable;
2. The retiring official/employee 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
3. The retiring official/employee shall not have previously availed of the privilege under a retirement benefit plan of the same or another employer.

In case of transfer of employees from one participating company to another participating company within a multi-employer plan (where two or more related reporting entities contribute for the benefit of its retiring officials and employees)  due to a valid merger, the aggregate years of service to the said companies shall be considered in computing the prescribed the ten (10)-year period, provided, however, that said employees did not receive their respective separation pay from their previous employer/company.

Requisites of a reasonable retirement benefit plan

1. It must be a definite written program
2. It must be a permanent and continuing program unless sooner terminated by virtue of a valid business reason
3. Coverage
   1. Percentage Basis – must cover at least 70% of all officials and employees, excluding the following:
      1. Those employed less than the minimum length of time stated in the plan;
      2. Those who work twenty (20) hours a week or less; and
      3. Seasonal employees who work five (5) months a year or less
   2. Classification Basis – Employer may set up a plan under a classification set-up prescribed by the employer and limit the coverage to employees in a certain classification, provided that the coverage of the plan must not discriminate in favor of officers, shareholders, supervisors, or highly compensated employees.
4. The employer, or officials and employees, or both, shall contribute to a trust fund for the purpose of distributing to the officials and employees or their beneficiaries, the corpus and income of the fund accumulated by the trust
5. Such corpus or income of the trust fund must at no time be used for, or diverted to, any purpose other than for the exclusive benefit of the said officials and employees.
6. There must be no discrimination in contributions or benefits in favor of officials and employees who are officers, shareholders, supervisors, or highly compensated.
7. The rights of each official or employee to benefits accrued to the date of such termination or discontinuance, to the extent then funded, or the rights of each employee to the amounts credited to his account at such time are non-forfeitable.
8. Forfeitures arising from severance of employment, death, or any other reason, must not be applied to increase the benefits any employee would otherwise receive under the plan at any time prior to the termination of the plan at the complete discontinuance or employer contributions thereunder.

Amendments to the Tax Qualified Retirement Plan

During the period that the Retirement Plan is in operation, amendments thereto may be made. Such amendments must be submitted for certification that the amendment/s do not affect the qualification of the Retirement Plan.

There are no specific limitations to investments which may be made by the trustees of an employee’s trust. In general, the fund may be used by the trustees to purchase any investments permitted by the trust agreement.

The retirement fund must not be used to invest/deposit in any of the employer’s business ventures to maintain the separation of the employee’s trust fund from that of the employer’s trust.

Administrative Matters

Certificate of Qualification for Tax Exemption

The employer shall apply with the BIR Legal and Legislative Division for the issuance of a Certificate of Qualification for Tax Exemption of the employee retirement benefit plan within thirty (30) days from the date of the effectivity of the retirement benefit plan.

RR No. 15-2025 enumerated the documentary requirements to be submitted to the BIR depending on whether it is a trusteed Retirement Plan or a retirement plan which assets/funds are being held, managed, and administered by a separate entity or group of individuals that is designated or appointed as trustee by an employer for the benefit of its employees, a non-trusteed/insured Retirement Plan, or Multi-employer Plans.

Fees to be paid by Employers

An employer shall pay the following fees:

• Upon issuance of the certificate of qualification for tax exemption

Employers not having more than 50 employees	PHP2,000.00
Employers having more than 50 but not more than 100 employees	PHP3,000.00
Employers having more than 100 employees	PHP5,000.00

• Upon issuance of an amendatory certificate of qualification for tax exemption

Employers not having more than 50 employees	PHP2,000.00
Employers having more than 50 but not more than 100 employees	PHP3,500.00
Employers having more than 100 employees	PHP5,000.00

Employers not having more than five (5) employees shall be exempt from the fees.

Filing of Returns

The trustees of all trusted Retirement Plans are required to file an annual information return on or before April 15 of each year together with the copy of issued Certificate of Qualification.

On the other hand, insurers/custodian of funds of non-trusted or insured plans, should continue to file the regular income tax returns for income or earnings derived from investments of the covered employees’ retirement fund which are subject to income tax.

RR No. 15-2025 took effect fifteen (15) days from its publication in the Official Gazette or the BIR official website, or on 15 May 2025.