BIR Ruling [UN-017-96]

January 10, 1996 BIR RULING [UN-017-96] Philcomsat Telecoms Plaza Bldg. 316 Sen. Gil Puyat Ave. 1200 Makati City Attention: Mr . Oscar Rudijer T . Santiano Vice-President Gentlemen : This refers to your letter dated January 2, 1996 requesting confirmation of your opinion to the effect that the separation benefits to be received by Ms. Ma. Lourdes T. Rodriguez due to redundancy is exempt from tax. It is represented that Ms. Ma. Lourdes T. Rodriguez has been working with you since August 1, 1970; that Ms. Rodriguez was an Executive Secretary to the Vice President for Operations since February 5, 1981; that when the Vice President for Operations retired last June 1995, she does not have anyone to work for; that at present, you do not intend to fill up the position; and that your are retiring her from the service due to redundancy. In reply, please be informed 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 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 pays benefits to the official or employee or his heirs as a consequence of such separation. Since the separation of Ms. Ma. Lourdes T. Rodriguez is beyond her control, any and all amounts to be received by her as a result thereof, is exempt from all taxes and consequently from the withholding tax prescribed by Section 72, Chapter X, Title II of the Tax Code, as amended by Batas Pambansa Blg. 135 and implemented by Revenue Regulations No. 6-82. It is however, understood that the payment of the salary of Ms. Ma. Lourdes T. Rodriguez if any, is subject to income tax. (BIR Ruling No. 197-92 dated April 13, 1992) cdtech Very truly yours, ALICIA P. CLEMENO Assistant Commissioner Legal Service By: ALICIA L. TOMACRUZ Head Rev. Exec. Assistant (Legal Service)