Exemption from Income Tax — Termination Benefits

April 1, 1981 BIR RULING NO. 062-81 029-b-7-B 000-79 062-81 Mrs. Alicia L. Pilares c/o The Security Bank & Trust Co. SBTC Bldg., 6778 Ayala Avenue Makati, Metro Manila M a d a m : This refers to your letter dated January 7, 1981 requesting a ruling as to whether or not the benefits which you will receive as a consequence of the termination of your services as Vice-President for Administration of the Security Bank and Trust Company are exempt from the payment of income tax and consequently, from the withholding tax. It is represented that on December 29, 1980, you were served by the new owners of SBTC with a memorandum advising you of the termination of your services with the bank in view of the primarily-confidential character of your functions which to the thinking of the new management should be vested in a person of their personal choice and confidence. In reply thereto, I have the honor to inform you that pursuant to the final proviso of Section 1, R.A. No. 4917 which was incorporated effective June 3, 1977 by P.D. No. 1158-A in the Tax Code of 1977 as Section 29(b)(7)(B) thereof, any amount received by an official or employee or by his heirs from the 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 tax. Your separation from SBTC under the abovementioned circumstances is beyond your control . aisadc In view thereof, this Office is of the opinion, as it hereby holds, that any and all amounts which you may received as a result of your separation from the service of the bank are exempt from income tax and consequently, from the withholding provisions prescribed by Chapter XI of the Tax Code of 1977 as implemented by Revenue Regulations No. V-8 as amended by Revenue Regulations No. 9-75. It is however, understood that this tax-exemption does not include the bank payments for the salary and cash equivalent of your accumulated vacation and sick leave, if any. Very truly yours, RUBEN B. ANCHETA Acting Commissioner