Exemption of the Retirement Benefits Received from the Philippine Commercial International Bank

October 9, 1989 BIR RULING NO. 212-89 28 (b) (7) (B) 191-89 212-89 S i r : This refers to your letter dated September 12, 1989 requesting exemption of the retirement benefits which you received from the Philippine Commercial International Bank. It is represented that in a letter dated May 22, 1989, Mr. Jesus P. Estanislao, Chairman of the Board of the Development Bank of the Philippines offered you to serve the government by joining the DBP with the rank of SVP; that the letter further states that DBP is "in need of a senior officer with a background in the management of computer operations, systems planning and development, methods and operations review, formulation and update of operating policies, procedures and controls. We believed you can fill our need"; that you were in no position to refuse the offer to join the government service although the move cannot be justified financially; and that you retired from PCIBank after a stint of ten (10) and a half years. In reply thereto, I have the honor to inform you that pursuant to Section 28(b)(7)(B) of the Tax Code, as amended any amount received by an official or employee or by his heirs from his employer as a consequence of separation by 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 abovementioned law requires the presence of these two conditions in order that the employee benefits may be granted tax exemption: (1) the employee is separated 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; and (2) the employer pay benefits to the official or employee or his heirs as a consequence of such separation. Since you are in no position to refuse the offer of Mr. Jesus P. Estanislao to serve a government controlled corporation, your leaving the private sector to join a government controlled corporation is beyond your control. Accordingly, any and all amounts received by you as a result thereof, are exempt from all taxes and consequently from the withholding tax prescribed by Section 71, Chapter X, Title II of the Tax Code, as amended by Batas Pambansa Blg. 135 and implemented by Revenue Regulations No. 6-82 dated October 1, 1982. It is, however, understood that the tax exemption does not include the commutations or company's payment for salary and cash equivalent of accumulated vacation and sick leaves, if any. cdtech Very truly yours, (SGD.) JOSE U. ONG Commissioner