Question & AnswerQ&A (BIR REVENUE MEMORANDUM ORDER NO, 26-11)
Separation benefits received by officials or employees, or their heirs, due to death, sickness, or other physical disability are exempt from income tax and withholding tax regardless of age or length of service, pursuant to Section 32(B)(6)(b) of the Tax Code of 1997, as amended.
The two conditions are: (1) the official or employee is separated from service due to death, sickness, other physical disability, or any cause beyond their control; and (2) the official/employee or their heirs receive any amount from the employer because of such separation.
Required documents include: (1) letter request from the official/employee (or heirs) or employer; (2) certified true copy of the death certificate (if applicable); (3) sworn affidavits from attending physician and head of office confirming sickness or disability; (4) clinical records; (5) laboratory examinations or medical certificates confirming the illness or disability.
The request must be submitted to the Revenue District Office (RDO) where the employer is originally registered.
A Notice to Comply will be issued to the applicant. If the applicant does not submit the required documents within the prescribed period, a Notice of Archiving will be issued, and the application will be archived.
The RDO pre-evaluates the documents, then the Revenue District Officer forwards the complete application to the Legal Division of the Revenue Region for evaluation and preparation of the Certificate of Tax Exemption.
Separation benefits are exempt from income tax under Section 32(B)(6)(b) and from withholding tax under Section 79 of the Tax Code, as implemented by relevant Revenue Regulations.
No. Other income received before separation is subject to income tax pursuant to Section 24 of the Tax Code.
The Certificate is numbered using the format: "BIR CTE No. RR 01 -RDO 001-10-00001" indicating the Revenue Region, RDO number, calendar year, and sequential certificate number. Three copies are issued: original to the taxpayer, duplicate for the docket, and triplicate to the ACIR Legal Service.
Yes, the Bureau may require additional documents to prove entitlement to tax exemption depending on prevailing circumstances.
The Regional Director approves the issuance after re-evaluation of the application.
Such applications will be acted upon accordingly by the Law Division in the National Office as a transitory provision.
The Order took effect immediately upon its adoption on June 13, 2011.
All issuances or portions thereof inconsistent with this Order are repealed accordingly.