Tax Exemption of Separation Benefits Paid to Employees Who Opted to Resign

October 7, 1992 BIR RULING NO. 277-92 28 (b) (7) (B) 277-92 Republic Planters Bank Legaspi Towers 300 Roxas Boulevard cor. Vito Cruz, Manila Attention: Mr . Florido P . Casuela Gentlemen : This refers to your letter dated 12 August 1992 requesting a ruling on whether the separation benefits to be received by some of the personnel of PNB Republic Bank, Bacolod Branch are exempt from tax and consequently, from withholding tax. cdta It appears that the Management of PNB Republic Bank decided to reduce their staff by transferring their employees to other branches of the bank; that for fear of being far from their families or for some other reason, said employees opted to resign from PNB Republic Bank. In reply, please be informed that the phrase "beyond the control of the said official or employee" under Section 28 (b) (7) (B) of the Tax Code as amended, connotes involuntariness on the part of the official or employee. The separation from the service of the official or employee must be asked for or initiated by him. It must not be of his own volition or choice. In the instant case, the separation of your employees is due to their own volition by opting to resign rather than to be transferred to another branch. cdti Based on the foregoing; any and all amounts to be received by your resigning employees are subject to tax and consequently, to the withholding tax. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue