A Comprehensive Guide to the Revised Private Retirement Benefit Plan Regulations (RR No. 015-2025)

By : Atty. Carlos Gabriele M. Punzal and Isabelle R. Gonzales | 16 January 2026

In the landscape of Philippine labor and taxation, the security of an employee's post-employment life is of paramount concern. Recognizing this, the government has long offered tax incentives to encourage private firms to establish retirement funds for their workforce. In April 2025, the Bureau of Internal Revenue (“BIR”) issued Revenue Regulations (RR) No. 15-2025, also known as the "Revised Private Retirement Benefit Plan Regulations".[1]

For over 50 years RR No. 1-68 served as the primary benchmark for “reasonable” retirement plans. While the core spirit remains, RR No. 15-2025 introduces stricter compliance timelines and acknowledges modern financial structures that did not exist before.

RR No. 015-2025 revises the policies and guidelines governing the taxability of retirement benefits, updating the framework originally set by Republic Act No. 4917, and previous regulations dating back to 1968. For employers and human resource practitioners, understanding these regulations is critical to maximizing tax efficiency while ensuring compliance.

Defining a "Reasonable" Private Retirement Benefit Plan

At the core of RR No. 15-2025 is the concept of a "reasonable private retirement benefit plan." The regulation defines this as a plan maintained by an employer to provide benefits to officials and employees upon retirement, funded by contributions from the employer, the employees, or both.

For a plan to be recognized by the BIR, it may take several forms, including a pension plan that provides definitely determinable benefits over a period of years, usually for life, after retirement; a profit-sharing plan that allows employees to participate in the employer’s profits; a stock bonus plan, which operates similarly to a profit-sharing plan but distributes benefits in the form of the employer’s shares; a gratuity plan that grants definitely determined benefits payable in full and immediately upon retirement rather than over time; or a provident fund, which serves as a voluntary investment and long-term savings mechanism for retirement.

Crucially, the regulation mandates that the corpus or income of the fund must never be diverted to any purpose other than the "exclusive benefit of the said officials and employees".

Why Qualify for the Tax Incentives?

The primary motivation for establishing a BIR-approved plan lies in the substantial tax privileges available to the employer, the trust, and the retiring employee. Upon securing a Certificate of Qualification from the BIR, the following incentives apply:

1. For the Retiring Employee: Income Tax Exemption

Retirement benefits received by officials and employees under a Tax Qualified Plan are exempt from income tax and, consequently, from withholding tax. This exemption significantly increases the net take-home pay of a retiree, providing a stronger financial safety net.

2. For the Trust Fund: Investment Income Exemption

The income generated by the trust from its investments is generally exempt from income tax. This allows the fund to grow faster, compounding returns without the drag of regular taxation.

• Note: This exemption does not extend to the stock transaction tax. Income from investments in shares listed and traded in the local stock exchange remains subject to the stock transaction tax under Section 127(A) of the Tax Code.

3. For the Employer: Tax Deductibility

Employers can deduct their contributions to the trust from their gross income. This includes:

• Normal Cost: Contributions by Employers to the trust covering the pension liability accrued during the current taxable year.

• Past Service Cost: Contributions by Employers to the trust in excess of the normal cost (e.g., funding for years of service prior to the plan's inception), provided this amount is amortized in equal parts over a period of ten (10) consecutive years.

Conditions for Tax Exemption Availment

     While a retirement plan may be duly qualified, the tax exemption applies only to the actual retirement benefits received by an employee if all three of these conditions are satisfied: First, the retirement plan must be reasonable, as determined by the Commissioner of Internal Revenue. Second, the retiring employee must have rendered at least ten (10) years of continuous service with the same employer and must be at least fifty (50) years old at the time of retirement. Third, the employee must not have previously availed of the tax-exemption privilege under any retirement plan, whether with the same employer or with a different employer.

The Multi-Employer Plan Rule

RR No. 15-2025 provides clarity for "multi-employer plans" which are plans where related entities (like parents and subsidiaries) contribute. In cases of valid mergers or transfers between participating companies, the aggregate years of service across these companies are considered when computing the 10-year requirement. This ensures employees are not penalized for corporate restructuring outside their control.

Requisites of a Reasonable Plan

Section 5 of the regulations sets out the standards for determining whether a retirement plan is “reasonable” and therefore qualified.

To begin with, the plan must be embodied in a definite written program and intended to be permanent in character, rather than a temporary or ad hoc arrangement. It must also meet coverage requirements by covering at least seventy percent (70%) of all officials and employees. Where the plan applies only to a particular class of employees, it must not discriminate in favor of any class of officers, shareholders, supervisors, or highly compensated personnel. In the same vein, the structure of contributions or benefits must not be skewed to favor higher-ranking or higher-paid employees.

The regulations further require that the plan provide for non-forfeitable rights, meaning that if the plan is terminated or employer contributions are discontinued, employees must retain their rights to benefits accrued up to that point, to the extent these are funded. Finally, while forfeitures may arise, the regulations expressly prohibit the use of such forfeitures to increase the benefits of remaining employees; instead, these amounts must be applied to reduce the employer’s future contributions.

Prohibited Investments and Diversion

To maintain tax-exempt status, the retirement fund must operate strictly for the employees' benefit. While there are generally no specific limitations on the types of investments the trustees can make of an employee’s trust, the regulations explicitly prohibit transactions that result in the diversion of income or corpus to the employer or related parties.

Specific prohibited transactions that will cause the denial of tax exemption include:

• Lending money to the employer without adequate security and reasonable interest.

• Paying compensation in excess of a reasonable allowance for salaries

• Buying securities/property from the employer for more than adequate consideration.

• Selling securities/property to the employer for less than adequate consideration.

Furthermore, the regulations clarify that the Retirement Fund must not be invested or deposited in the employer's own business ventures to ensure the strict separation of the employee trust fund from the employer's assets.

Application and Compliance Procedures

Employers must be proactive to secure these benefits. An application for a Certificate of Qualification must be filed with the BIR Legal and Legislative Division within thirty (30) days from the date of the plan's effectivity.

The fees for the issuance of a Certificate of Qualification are tiered based on the number of employees:

• PHP 2,000 for employers with 50 employees or less.

• PHP 3,000 for employers with 51 to 100 employees.

• PHP 5,000 for employers with more than 100 employees.

• Small employers with not more than five (5) employees are exempt from these fees.

Moreover, Trustees of the retirement plan are required to file an annual information return by April 15 of each year with the Revenue District Office (RDO) having jurisdiction over the employer.

Conclusion

Revenue Regulations No. 15-2025 serves as a vital update to the regulatory framework of private retirement plans in the Philippines. By strictly defining what constitutes a "reasonable" plan and explicitly outlining the prohibited transactions, the BIR aims to protect the integrity of retirement funds while continuing to offer generous tax incentives.

For employers, the message is clear: the tax benefits are significant, but they come with the responsibility of strict adherence to non-discrimination, non-diversion, and regular reporting of the Retirement Plan.

[1] Recto, R. (2025, April 29). Revised Private Retirement Benefit Plan Regulations [Review of Revised Private Retirement Benefit Plan Regulations]. https://bir-cdn.bir.gov.ph/BIR/pdf/RR%20No.%2015-2025.pdf Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views and opinions of the Firm or any of its partners. This article shall not be construed as official legal advice from the Firm.  Atty. Carlos Gabriele M. Punzal is a lawyer who earned both his Bachelor of Science in Legal Management and Juris Doctor degrees from De La Salle University. He previously worked as a tax supervisor at a leading tax and accounting firm, focusing on transfer pricing and taxation law. He also gained considerable legal experience as a previous associate at a private law firm.

Isabelle R. Gonzales is a paralegal who earned her Bachelor of Science in Human Ecology (magna cum laude) from the University of the Philippines Los Baños. She is currently completing her Juris Doctor degree at San Beda College Alabang School of Law, where she is in her second year.

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