RR 15-2025: Clarifying tax rules for private retirement plans
The Bureau of Internal Revenue (BIR) released Revenue Regulation (RR) 15-2025 on April 29, 2025, clarifying and updating the tax rules applicable to qualified employee private retirement benefit plans. This RR aims to assist employers in understanding the terms, conditions and tax responsibilities associated with maintaining retirement plans that are eligible for tax exemptions – ensuring that employees receive fair and tax-free retirement benefits if certain conditions are met.
Definition of a reasonable private retirement benefit plan
A reasonable private retirement benefit plan is one maintained by an employer for some or all of its officials or employees. Contributions are made by the employer, or by both the employer and employees, to accumulate a fund whose earnings and principal will be distributed at a later time, typically upon the employee’s retirement or separation from service. The plan must ensure that no part of the fund’s corpus or income is used for any purpose other than the exclusive benefit of the employees.
A retirement plan may include a pension, gratuity, provident fund, stock bonus or profit-sharing plan or any other similar arrangements. This may be contributory or non-contributory on the part of the employees.
Key points under RR 15-2025
This RR builds on earlier issuances (RR 1-1983, RR11-2001 and RMC 10-1983) and provides clearer instructions on how to apply existing tax rules, as follows:
• The RR confirms that not only pension and gratuity plans but also provident funds, stock bonus plans and profit-sharing schemes can qualify for tax benefits.
• Related companies (e.g., parent and subsidiary firms) may share a single retirement plan under a multi-employer plan.
• In the event of a valid merger where employees are transferred from one participating company to another within a multi-employer plan, their total years of service with both companies will be included in calculating the required 10-year period – provided they did not receive separation pay from their previous employer.
• While the law does not limit trustee investments, specific disqualifying transactions could remove the tax-exempt status. These can include lending without adequate security or interest, paying excessive compensation for personal services rendered, preferential treatment in services, buying or selling assets at unfair prices and any transaction that diverts fund income or assets improperly.
• If the retirement plan qualifies, tax exemptions apply retroactively from the plan’s effective date.
• Employers must apply for a certificate of qualification within 30 days from the plan’s effectivity. Late filings may result in penalties. For the application, there are BIR forms to be accomplished and documentary requirements to be submitted to the BIR. These documentary requirements differ depending on the type of plan – trusteed retirement plan, non-trusteed/insured retirement plan and multi-employer plans.
• Upon the issuance of a certificate of qualification or an amended certificate of qualification, the employer shall pay a fee ranging from P2,000 to P5,000, depending on the number of employees. However, employers with five or fewer employees shall be exempt from paying this fee.
• The retirement fund shall 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.
• Trustees of all trusteed retirement plans are required to file an annual information return with the BIR and insurance companies, as insurers/custodian of funds of non-trusteed or insured plans, should continue to file the regular income tax to report investment income.
Tax incentives for qualified plans
A Tax-Qualified Plan, approved by the BIR and issued a certificate of qualification, is entitled to the following tax benefits:
Employees aged 50 or older with at least 10 years of service can receive retirement benefits exempt from income and withholding taxes.
Income earned by the retirement fund is tax-exempt, except for stock transaction tax.
Employer contributions are deductible from taxable income, including excess contributions, which may be amortized over 10 years.
What employers need to know
Employers should take careful note of the opportunities for tax savings under the RR:
Contributions are tax-deductible subject to conditions.
While an application for a certificate of qualification is pending, retirement benefits and fund income remain tax-exempt. If the application is denied, the employer or trust becomes liable for the deficiency income taxes due on the same.
Any changes to an existing retirement plan must be submitted for BIR review to ensure continued tax qualification.
Failure to comply with the BIR’s registration and reporting requirements could result in disqualification – turning tax-exempt benefits into taxable liabilities.
What employees should know
Employees covered under qualified plans should understand their entitlements:
Qualified employees can receive retirement payouts tax-free.
Employees must meet the age and service requirements to qualify for tax-free benefits.
Tax-free retirement benefits can only be claimed once during an individual’s employment history.
Dennice Clyte Ramirez is a senior tax manager at R.G. Manabat & Co. (KPMG in the Philippines), a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. The firm has been recognized as a Tier 1 in Transfer Pricing Practice and in General Corporate Tax Practice by the International Tax Review. For more information, you may reach out to Dennice Clyte M. Ramirez or Karen Jane S. Vergara-Manese through [email protected], social media or visit www.home.kpmg/ph.
This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity. The views and opinions expressed herein are those of the author and do not necessarily represent KPMG International or R.G. Manabat & Co. (CB1)