Request for Exemption from Withholding Tax on Termination Benefits Received from St. Paul College

May 8, 1984 BIR RULING NO. 093-84 29-c-037-84-092-84 M a d a m : This refers to your letter dated March 26, 1984 requesting exemption from the withholding tax on the termination benefits which you will receive from Saint Paul College, Manila as a result of the phasing out of its high school department. 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 or by his heirs from the employer as a consequence of the 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 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. (Sec. 2(b)(2), Revenue Regulations No. 6-82). In view thereof, and considering that your separation from the service of St. Paul College, Manila due to the phasing out of its high school department is not of your own making, this Office is of the opinion as it hereby holds that any and all amounts you will receive from the said school as a result thereof are exempt from all taxes and consequently, from 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. It is however, understood that this tax exemption does not include payments for your salary and cash equivalent of your accumulated vacation and sick leaves, if any. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner