BIR Ruling

July 20, 1970 Mr. Felipe A.. Maclang 2 Dagohoy St., Militona Subd. Cubao, Quezon City S i r : This refers to your letter dated January 8, 1970 requesting an opinion as to whether or not your separation pay is exempt from the payment of income tax under Republic Act No. 4917. It is represented that on May 15, 1967 you were separated from the service of your employer and that the reason for your separation is stated in a letter of your employer dated May 15, 1967 which we quote as follows: cdt "We refer to our recent discussions in this Office in which the position was put to you that as a result of our reorganization the company now finds itself without opportunity to utilize your services to the full. In consequence, it has reluctantly decided to offer you your release from its employ with effect from May 15, 1967." In reply thereto, I have the honor to inform you that Section 1 of Republic Act No. 4917 provides in part, viz.: ". . . Provided, finally, That in case of separation of an official or employee from the service of the employer due to death, sickness or other physical disability or for any cause beyond the control of the said official or employee, any amount received by him or by his heirs from the employer as a consequence of such separation shall likewise be exempt as hereinabove provided." Section 4(f) of Revenue Regulations No. 1-69 dated March 25, 1968 implementing Republic Act No. 4917 states that the phrase "for any cause beyond the control of said official or employee" connotes involuntariness on the part of the official or employee. The separation from the service of the official or employee must not be asked for or initiated by him. In other words, the separation must not be of his own making. From the aforequoted portion of the letter of your employer, it is obvious that if not for the reorganization of your employer in which your services can no longer be utilized, your services would not have been terminated. In view thereof, and it appearing from your representations that your separation from the services of your employer is for a cause beyond your control, this Office believes and so holds that your separation pay as a consequence thereof is exempt from the payment of all taxes. cdta Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue