Applicability of the Tax Exemption of the Separation Pay Package of the PCIB

March 4, 1988 BIR RULING NO. 074-88 28 (b) (7) (B) 042-88 074-88 Gentlemen : This refers to your letter dated February 17, 1988 requesting clarification of BIR Ruling No. 28(b)(7)(B) 026-88-042-88 dated February 11, 1988 as to whether the tax exemption of the Separation Pay Package of the Philippine Commercial International Bank (PCIB) employees still applies under the following circumstances: cdt "(a) The additional premium pay is increased from 50% to 100%; "(b) Some of the employees who have rendered at least 20 years of service regardless of age shall be covered; "(c) Some of the employees to be terminated have rendered service for at least 10 years but are below 50 years of age; "(d) Aside from the causes mentioned in BIR Ruling No. 042-88, termination shall be due to any of the following causes: 1. Disability of the following nature: a) Permanent disability of physical or mental in nature that will now allow performance of assigned function, duties and responsibilities as certified by the Bank's retained/approved physician; b) Illness of a lingering nature such as cancer, hypertension, and the like that will not allow/impair performance of assigned functions, duties and responsibilities as certified by the Bank's retained/approved physician; c) Communicable diseases, e.g., tuberculosis, venereal diseases, AIDS and the like that will endanger the health of co-employees as certified by the Bank's retained/approved physician; 2. Redundancy This means separation due to the elimination of position occupied by the staff to be separated and there will be nobody replacement in future or due to merger/reorganization/change in processes and procedures there are two or more staffs for a single position." In reply thereto, I have the honor to inform you that pursuant to 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 by 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. Such being the case, the following: (1) Additional premium pay which is increased from 50% to 100%; (2) Benefits to be received by some of the employees who have rendered at least 20 years of service regardless of age; and/or with at least 10 years of service but below 50 years of age; and (3) Benefits to be received by the PCIB employees as a result of their termination and/or separation due to the aforestated nature of their physical disability and of redundancy. are exempt from all taxes and consequently from the withholding tax prescribed by Section 71, Chapter X, Title II of the Tax Code, as amended by Batas Pambansa Blg. 135 and implemented by Revenue Regulations No. 6-82 dated October 1, 1982. cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner