Exemption from Withholding Tax on Retirement Benefits to Be Received from the Philippine Veterans Bank

April 24, 1984 BIR RULING NO. 076-84 29-c-211-83-076-84 S i r : This refers to your letter dated March 26, 1984 requesting exemption from the withholding tax on the retirement benefits which you will receive from the Philippine Veterans Bank. It is represented that on February 28, 1984, you tendered you resignation as member of the Board of Directors of the Bank pursuant to a memorandum dated February 14, 1984 of the Deputy Presidential Executive Assistant to the President of the Bank to effect immediately the reorganization of its Board of Directors with all the members thereof to tender their courtesy resignation. In reply, I have the honor to inform you that pursuant to Section 29(c)(7)(B) of the Tax Code as amended, any amount received by an official or employee as a consequence of separation from the service for any cause beyond the control of the official or employee is exempt from income tax. 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 his own making or choice . Your courtesy resignation and consequent separation from the service as a result of the reorganization of the Board of Directors of the Bank fall within the purview of said phrase. (Sec. 2(b)(2), Revenue Regulations No. 6-82) Moreover, under Section 29(c)(7)(F) of the Tax Code, as amended, benefits received from GSIS and the retirement gratuity received by government officials and employees are exempt from income tax. In view thereof, this Office is of the opinion as it holds that any and all amounts which you will receive from the Philippine Veterans Bank as a result of your separation from the service of the Bank pursuant to the aforementioned memorandum of the Deputy Presidential Executive Assistant are exempt from all taxes and consequently, from the withholding tax prescribed by Section 91, Chapter XI, Title II of the Tax Code, as amended by Batas Pambansa Blg. 135 and implemented by Revenue Regulations No. 6-82, supra . It is, however, understood that this tax exemption does not include the Bank's payments for your salary, allowances, fees and cash equivalent of your accumulated vacation and sick leaves, if any. iatdc Very truly yours, (SGD.) TOMAS C. TOLEDO Acting Commissioner