Any and All Amounts to be Received by an Employee as a Result of His Separation and Early Retirement from the Company are Exempt from All Taxes

June 4, 1991 BIR RULING NO. 098-91 26 (b) (7) (B) 214-90 098-91 S i r : This refers to your letter dated April 30, 1991 requesting a ruling as to whether any and all amounts that you will receive from the International Flavors & Fragrances (Philippines) Inc., IFF Center, No. 14 Arayat St., Mandaluyong, Metro Manila, as a result of the abolition of your position and consequently your availment of the early retirement program of the company is exempt from income tax. cdt It is represented that in view of the new thrust of management to put greater weight on sales and marketing, there will be an inevitable change in the organizational structure of the company to further streamline the operational capability of the Fragrance Division that the position of Plant Manager/Account Executive which you are currently occupying will be abolished and in its stead 2 new position of Account Manager will be created; and that the production plant will just be headed by a Plant Supervisor because of improved production facilities and simplified operations. In reply thereof, 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 employees 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 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. Considering that the position of Plant Manager/Account Executive was abolished as per certification dated May 2, 1991 of Mr. Merlin V. Argos, the Managing Director of International Flavors & Fragrances (Philippines) Inc., any and all amounts to be received by you as a result of your separation and early retirement from the company are exempt from all taxes and consequently from the withholding tax prescribed by Section 72, Chapter X, Title II of the Tax Code, as amended by Batas Pambansa Blg. 135 and implemented by Revenue Regulations No. 6-82 as amended. However, the tax exemption does not include the company's payment for salary and cash equivalent of accumulated vacation and sick leave credits of its employees. This ruling is issued based on the factual representations that there is involuntary separation. However, if upon subsequent verification it is found that involuntariness is wanting this ruling shall be considered void as initial. Very truly yours, (SGD.) JOSE U. ONG Commissioner