BIR Ruling

May 7, 1970 Messrs. Ross, Salcedo, del Rosario Bito & Misa P. O. Box 781 Manila, 12105 Gentlemen : This refers to your letter of December 22, 1969 requesting information as to the meaning of "involuntary separation" as used in Section 3 of Revenue Regulations No. 1-68, implementing the final proviso of Section 1 of Republic Act No. 4917. aisa dc Republic Act No. 4917 as well as its implementing regulations do not contain a definition of the phrase "involuntary separation". Instead they state only the causes giving rise to the same, such as, separation from the service of the employer by reason of death, sickness or other physical disability, or for any cause beyond the control of said officials or employees. No hard and fast rule may be adopted as interpretative of the phrase "beyond the control of the official or employee" within the contemplation of Republic Act No. 4917. For this purpose, the facts of each particular case must have to be considered. For instance, an official or employee separated without cause may not exactly be separated beyond his control. Considering that the tenure of office of private officials and employees is protected by existing laws, all the facts and circumstances surrounding such termination must necessarily have to be considered. Separation for cause is definitely within the control of the official or employee, the cause being his own making. Thus, if the company adverted to in your inquiry closes or terminates its business in the Philippines resulting to the severance from its services of all its employees, such an event is considered a cause beyond the control of the employees as said employees are not responsible for the separation but was forced by the circumstances. Consequently, any retirement benefits or gratuity that may be received by the said employees are exempt from income tax and necessarily from the withholding tax regardless of whether the said employees at the time of separation have less than 10 years of service and/or are below 50 years in age. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue