Whether an Employee Who is More than Fifty Years of Age and Who Retired in Order to Become a Minister of the Church is Exempt from Withholding Tax on Separation Pay

January 29, 1991 BIR RULING NO. 012-91 28 (b) (7) (B) 258-89 012-91 Gentlemen : This refers to your letter dated September 19, 1990 inquiring whether your employee who is than fifty years of age and who retired in order to become a minister of the church, is exempt from the withholding tax on separation pay. In reply, I have the honor to inform you that under Section 28(b) (7) (B) of the Tax Code, as amended, any amount received by an official or employee or by his heirs from his employer as a consequence of separation of such 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 is exempt from taxes regardless of age or length of service. The phrase "for any cause beyond the control of the 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 or choice. Since your employee's separation or retirement is of his own choice as he desires to serve the church as minister, it is therefore, not involuntary on his part to be separated from his employment. Accordingly, the separation pay to be received by him is subject to income tax and to the withholding tax prescribed under Section 72, Chapter X, Title II of the Tax Code as implemented by Revenue Regulations No. 6-82 as amended. Very truly yours, (SGD.) JOSE U. ONG Commissioner