BIR Ruling

October 27, 1969 MEMORANDUM FOR : The Chief, Withholding Tax Division (Thru the Revenue Operation Head) (Assessment) This is in connection with your inquiry regarding the operation of Republic Act No. 4917. All retirement benefits under a duly established qualified retirement plan are exempt from tax provided the retiree (compulsory or optional) at the time of retirement is at least 50 years of age and must rendered at least 10 years of service. Benefits under voluntary separation are subject to tax even if the employee at the time of separation is more than 50 years of age and had rendered more than 10 years of service. Voluntary retirement should be distinguished from optional retirement. Voluntary retirement may be considered as voluntary separation. It is in this light that this Office had previously held that benefits under a voluntary retirement are subject to tax. However, benefits given by employers on account of involuntary separation, such as those arising from death, sickness or other physical disability or for any cause beyond the control of the employee are exempt from tax even if the employee at the time of separation is less than 50 years old or had rendered less than 10 years of service. LibLex Be guided accordingly. (SGD.) MISAEL P. VERA Commissioner of Internal Revenue