BIR Ruling No. 132-83

July 19, 1983 BIR RULING NO. 132-83 Gentlemen : This refers to your letter dated May 11, 1983 requesting a ruling whether the separation benefits received by Mr. Renato O. Avena, who was separated from the service of your company due to retrenchment , are subject to withholding tax. It appears that you had been retrenching your employees on account of heavy financial losses, that Mr. Avena was one of those retrenched; and that on December 29, 1982, he was notified of his separation from your company on account of retrenchment effective January 31, 1983. In reply, I have the honor to inform you that under the foregoing facts, the separation benefits are exempt from withholding tax. It has been established that the separation from the service was beyond the control of the official or employee, since it was involuntary on his part; that the separation was not asked for or initiated by him; and that it was not of his own making. Under the pertinent revenue regulations, any amount received by an official or employee or by his heirs from the 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 said official or employee, such as retrenchment and redundancy and cessation of business, is not subject to withholding (Sec. 2(b)(2), Revenue Regulations No. 6-82 dated October 1, 1982). It is, however, understood that this tax exemption does not include the Corporation's payments for the salary and cash equivalent of accumulated vacation and sick leaves, if any of Mr. Avena. cdtech Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner Bureau of Internal Revenue