BIR Ruling

September 19, 1973 Mr. Felipe Cruz Malolos, Bulacan S i r : In reply to your letter dated August 28, 1973, I have the honor to inform you that terminal leave pay or the payment of the money value of the accumulated vacation and sick leaves to a retiring employee under Republic Act No. 1616 is subject to income tax. (B.I.R. Ruling No. 432, s. of 1958 dated August 14, 1958, B.I.R. Ruling dated March 9, 1973) Vacation and sick leaves are privileges arising out of employment. The amount received by a retiree as equivalent in cash of his accumulated vacation and sick leaves is considered part of compensation paid to him by reason of such employment and, therefore, the recipient thereof should include such payment as income in his income tax return filed on or before April 15 of the year succeeding that in which the same was received. cdtech Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5