What makes retirement benefits tax free under RA 4917?

The benefit must be paid under a reasonable, BIR approved tax qualified plan, the employee must be at least 50 years old with at least 10 years of service with the same employer, and the tax free retirement can be availed only once.

Are employer contributions to a retirement plan tax deductible?

Yes. When the plan is BIR registered and funded through a retirement trust, the employer contributions are generally tax deductible, subject to the rules on normal and past service costs.

What is the difference between RA 4917 and RA 7641?

RA 7641 sets the minimum retirement benefit every qualified employee must receive. RA 4917 is the tax qualified vehicle that lets an employer deliver that benefit, and more, with the benefit tax free for employees and contributions deductible for the company.

How do you set up a tax qualified retirement plan?

Design the plan, set up a retirement trust, have an actuary determine the funding, and file for a BIR certificate of qualification for tax exemption. The incentives may be used while the application is pending, subject to the employer's liability if it is denied.

Did the rules on private retirement plans change recently?

Yes. In 2025 the BIR issued Revenue Regulations No. 15-2025, the Revised Private Retirement Benefit Plan Regulations, which update the older rules and clarify the incentives under RA 4917.

Tax Free Retirement Benefits Under RA 4917

A retirement benefit can reach your employee completely income tax free, and your contributions can be deductible, when the benefit is paid through a BIR registered, tax qualified plan under Republic Act 4917. Here is how it works and how to set one up.

What is RA 4917?

RA 4917 is the law that lets private employers set up tax qualified retirement plans. When a plan meets its conditions and is approved by the Bureau of Internal Revenue, the retirement benefit an employee receives is exempt from income tax, and the employer contributions to fund it become tax deductible.

The conditions for tax free benefits

For a retiring employee to receive benefits income tax free under RA 4917, all of the following must be met:

The plan is reasonable and approved by the BIR as a tax qualified plan.
The employee is at least 50 years old at retirement.
The employee has served the same employer for at least 10 years.
The tax free retirement benefit is availed of only once.

Why employers set up a qualified plan

A tax free benefit for employees, which makes the package more attractive.
Tax deductible contributions for the company when funded through a BIR registered trust.
A funded plan builds assets toward the obligation at a sustainable pace, rather than paying it all from cash at retirement.

How to set one up

Plan design. Define eligibility, the benefit formula, and retirement ages, at or above the RA 7641 minimum.
Trust agreement. Set up a retirement trust fund to hold the plan assets, separate from company funds.
Funding valuation. An actuary determines the contributions needed to fund the plan.
BIR application. File for the certificate of qualification for tax exemption. The incentives can be used while the application is pending, subject to the employer's liability if it is later denied.

RA 4917 and RA 7641, how they fit

RA 7641 sets the minimum benefit every qualified employee must receive. RA 4917 is the vehicle that lets you deliver that benefit, and more, in a tax efficient way. A well designed RA 4917 plan meets the RA 7641 floor while making the benefit tax free for employees and deductible for the company. See our RA 7641 guide.

A 2025 update worth noting

In 2025 the BIR issued Revenue Regulations No. 15-2025, the Revised Private Retirement Benefit Plan Regulations, which update the long standing rules and clarify the incentives under RA 4917. If you are setting up or reviewing a plan, confirm the current requirements with your advisor.

Key takeaways

RA 4917 lets employers set up BIR registered, tax qualified retirement plans.
Benefits are income tax free when the employee is at least 50 with at least 10 years of service, the plan is BIR approved, and it is availed once.
Employer contributions to a funded plan are tax deductible.
A qualified plan can deliver the RA 7641 minimum in a far more tax efficient way.

This article is general information, not legal, tax, or accounting advice. Philippine laws and regulations are updated from time to time, so confirm the specifics that apply to your company with your advisor.

Tax free retirement benefits under RA 4917