BIR Ruling No. 6-2018

REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE

M Quezon City

Section 32(B)(6)(b),1997 NIRC BIR Ruling No.479-2014 BIR Ruling No.416-2012

006-2018 1-10-2018

Multi-Line Ventures Corporation F8, J. King Warehouse, Sitio Orel Banilad, Mandaue City

Attention:Mr. Aurelio O. Angeles President

Gentlemen:

result of continuous business losses. exemption on the separation pay of its employees to be terminated by reason of closure as a This refers to your letter dated January 23, 2016 requesting for certificate of tax

It is represented that Multi-Line Ventures Corporation (MLVC) is a corporation duly organized and existing under the laws of the Philippines. It is principally engaged in the business of trading/contracting of architectural products. MLVC has a business office and warehouse located at 1620 Herman Cortes St., Banilad, Mandaue City (TIN It also has an office situated at Km. 6,Purok 47,Ma-a Road, Roldan Village,Davao Ciry (TIN and warehouse be closed due to business losses and that there be absolute termination of its business losses and that there be cessation of operations of the establishment on December 3 1. 2015. through Board Resolution No. operations effective December 31; 2015. In the same way, through Board Resolution No. 2015. MLVC management needed to lay-off a total of forty-five (45) employees, as follows: the said Board decided that the Davao office of MLVC be likewise closed due to ). In a Special Meeting of the Board of Directors of MLVC on December 4, . the latter resolved that the Mandaue office

1. Lepatan, Nina 2 Veloso, Maribel Name TIN

3 Conato, Kristina

3. Pangan, Ryan 6.Zamora,Mary Grace Dacles, Leonora

9. Fat, Rolly 8. Vente.Ralfie 10. Novo, JhunLimar Adlawan. Roberto

12.Ligaray,Vanessa 13.Lovitos.Negen 15.Playda,Ken Jones 14.Buni. Jaymar 1I.Potane,Maricris

17.Arana. Crisanto 16.Colon,Janet

18.Balane,Allan

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27. Lantaya, Larry T. 20. Santiago, Shiena 21.Casilac, Jake 22. Marquez, Emmanuel 23.Dela Cruz, Paul Vincent 24. Solangoy, Calixto C. Jr. 26. Enghog, Eleazar E. 28. Salang, Flordelitz 31. Dipelo, Leah 32. Navarez, Ronald 35.Esteban, Christine 36. Ligan, Charlie 41.Baylon, Danilo Jr. 42. Hernaez, Connie 43. Samon, Daryl 44. Pequit, Katrina 29. Florenosos, Mae R. 30. Fernandez, Joanna Rheasle 33.Ballen,Romillo 34. Bartolome, Gladen 37. Dubria, Joanne 38.Zurita,Maria Lea 39. Inutan, Jean Kristie 40. Del-is, Myrna Lynn 19.Simbajon.Mark Joseph 25. Lopez, Keith R

45. Felipe, Cristyl

as amended, any amount received by an official or employee or by his heirs from the employer as death, sickness or other physical disability or for any cause beyond the control of the said official or employee shall not be included in the gross income and shall be exempt from taxation under a consequence of separation of such official or employee from the service of the employer due to Title II of the same Tax Code. (BIR Ruling No. 416-2012 dated June 25, 2012) In reply, please be informed that pursuant to Section 32(B)(6)(b) of the Tax Code of 1997

The above-mentioned law requires the presence of two (2) conditions in order that the employee benefits may be granted tax exemption, namely: (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.

Submitted documents show that MLVC has already informed the Department of Labor and Employment (DOLE-Region .7, Cebu City and DOLE-Regional Office XI, Davao City) thru Establishment Termination Reports stating that the afore-mentioned employees have been separated from employment due to the company's financial losses and that the said workers have

been duly notified of their termination before the announced closure of MLVC.

Accordingly, the separation pay to be received by the above-named employees as a result

of their separation from the service is exempt from income tax and consequently from the

withholding tax prescribed by Section 79 of the 1997 Tax Code, as implemented by Revenue Regulations (RR) No. 2-98. as amended by RR Nos. 6-200i and 12-2001.

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commutation and payment of monetized unused vacation leave credits not exceeding ten (10) days during the year are not subject to income tax and consequently to the withholding tax. Conversely. the cash equivalent of vacation leave exceeding ten (10) days is subject to tax. However, this same Moreover, pursuant to Section 2.78.1 (A)(7) of RR 2-98, as amended, the terminal pay, i.e.

principle cannot apply to sick leave credits since an employee must actually go on sick leave to be able to avail of said leave credits.

employees' salaries and the payment of the 13th month pay and other benefits in excess of the Pht It is, however, understood that this exemption does not include the payment of the separated threshold under Section 2.78.1 (A)(3)(a) and (A)(7) of RR 2-98, as amended. (BIR Ruling Nos. 479-2014 dated December 3, 2014 and 416-2012 dated June 25, 2012)

This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be

considered as null and void.

Very truly yours,

CAESAR R. DULAY

K-1 \multiLine Commissioner of Internal Revenue 012512

1 As amended by Revenue Regulations No. 3-2015 dated March 13. 2015