BIR Ruling No. 211-83

November 28, 1983 BIR RULING NO. 211-83 Gentlemen : This refers to your letter dated November 10, 1983 requesting a ruling as to whether or not the amount representing the separation gratuity, loyalty cash gifts and money value of terminal leave credits which that Corporation will grant to its officials and employees who will be laid off as a consequence of its reorganization, are subject to income tax. It appears that the Corporation was reorganized pursuant to Executive Order No. 890 dated April 8, 1983; that after the reorganization all position shall be deemed vacant and all those not reappointed deemed laid off. 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 said 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. The separation was not of his own making. (Sec. 2(b)(2), Revenue Regulations No. 6-82) The laying off of the officials and employees as a result of the reorganization fall within the purview of said phrase. Such being the case, the separation gratuity as well as the loyalty cash gifts to be granted by the Corporation to its laid off officials and employees as a result of its reorganization are exempt from income tax. However, the money value of terminal leave credits granted to said officials and employees are subject to income tax. Likewise, the aforesaid amounts granted to officials and employees who voluntarily resigned from the service of that Corporation on or before the implementation of its reorganization plan are subject to income tax. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner Bureau of Internal Revenue