BIR Ruling [UN-226-94]

July 26, 1994 BIR RULING [UN-226-94] Chemical Industries of the Philippines, Inc. Chemphil Building 851 A. Arnaiz Avenue Legaspi Village Makati, Metro Manila Attention: Atty . Antonio P . Jamon, Jr . Assistant Vice-President Gentlemen : This refers to your letter dated March 1994 requesting for confirmation that a previously issued ruling on Special Early Retirement Program can be similarly applied to the Chemical Industries of the Philippines, Inc. and its other affiliates or applied to the entire Chemphil Group. cdtech It is represented that Chemphil Group in presently improving its productivity in order for it to cope and align itself with the present thrust of Philippines 2000; thus Chemphil Group seeks to streamline its operations and organizational structures to effectively respond to, among others, its increasing operating expenses. In reply, please be informed that your query is answered in the affirmative, provided that the 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 is due to death, sickness or other physical disability or for any cause beyond the control of the said official or employee regardless of age or length of service. The phrase "for any cause beyond the control of 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. In other words, the separation must not be of his own making or choice. In this case, the separation of your employees was brought about by the reduction of your workforce to keep the company viable, and even if initiated by the employees, the decision to accept the request for retirement under your Special Early Retirement Program, lies with the Company. Since it is the Company the decides whether an employee will be separated from the service or not, it is considered beyond the control of the official or employee. (BIR Ruling No. 058-89 dated April 15, 1989) It is understood, however, that the aforesaid tax exemption does not include your payment of salaries to the employees separated under your Special Early Retirement Program. (BIR Ruling No. 402-93 dated October 13, 1993) cdt Very truly yours, ALICIA P. CLEMENO Acting Assistant Commissioner Legal Service