I got a separation pay from my previous employer which includes the gratuity pay.

Question

This gratuity pay was included in my 2008 Income Tax Return, therefore, they computed my withholding tax including the gratuity pay. But I read from the website of Philippine BIR, gratuity and separation pay is not taxable. Can you tell if my understanding is correct, that they should not include the gratuity pay in my 2008 ITR, instead they should only compute the tax base on my salary earned before I resigned?

Answer 1

Yes that's true that gratuity and separation pay are not taxable but your gratuity pay should be included in your income tax return because it is considered as your earnings.