Terminal Leave Pay of Retiring TLRC Officers and Employees Shall Continue to be Subject to Withholding Tax

June 14, 1991 BIR RULING NO. 104-91 132-00 000-00 103-91 Gentlemen : This refers to your letter dated November 20, 1991 seeking our opinion on whether or not the terminal leave pay of resigned or retired employees and officers of Technology and Livelihood Resource Center (TLRC) should be subject to deduction of withholding taxes. cdti You represented that certain former employees who have either resigned or retired from TLRC are not claiming refunds, presumably, for the taxes withheld from their terminal leave pays on the basis of the Supreme Court En Banc Resolution on Administrative Matter No. 90-6-015-90 dated October 28, 1990. In reply, please be informed that in reiterating the exemption from the withholding tax of the terminal leave pay of its retiree-employee, Atty. Bernardo F. Zialcita, the Supreme Court, in another En Banc Resolution dated October 18, 1990, denying the motion for clarification and/or reconsideration of the Bureau of Internal Revenue, specifically stated that the August 23, 1990 resolution (Adm. M. No. 90-6-015-90) exempting terminal leave pay from withholding tax "applied only to the employees and officers of the Judiciary who retire, resign or are separated through no fault of their own." (Emphasis supplied) Since the retired/retiring TLRC employees are not retired/retiring employees of the Judiciary, the August 23, 1990 and October 18, 1990, and January 24, 1991 En Banc Resolution of the Supreme Court do not apply to them. However, in the case of Commissioner of Internal Revenue vs. the Court of Tax Appeals and Efren P. Castaeda (CA-G.R. Sp. No. 20482, which involves a retired officer of the Bureau of Internal Revenue, the Court of Appeals on September 30, 1990 affirmed the decision of the Court of Tax Appeals ordering the refund to Mr. Castaeda of the sum which was deducted from his terminal leave pay as withholding tax. In support of its decision, the Court of Appeals cited the above-mentioned En Banc Resolution of the Supreme Court in the Zialcita case. Due to the apparent modification by the Court of Appeals of the Zialcita resolution which is specifically limited to retirees of the Judiciary, the Bureau filed a Petition for Review with the Supreme Court requesting the latter for a clarification, among other things, if the issue of whether the resolution is applicable to other government offices and employees considering that Castaeda was not a retired officer of the Judiciary. In view of the foregoing, this Office is of the opinion as it hereby holds that until the above issued raised by the BIR in the Castaeda Case is decided by the supreme court in favor of government officers and employees other than those of the Judiciary, the terminal leave pay of retiring TLRC officers and employees shall continue to be subject to withholding tax. In the same manner, neither can the retired officers and employees of TLRC already claim for any refund for such taxes withheld from their terminal leave pays. cdta Very truly yours, (SGD.) JOSE U. ONG Commissioner