BIR Ruling No. 566-2017

REPUBLICOF THE PHHLIPPINES

BUREAU OF INTERNAL REVENUE DEPARIMENT OF FINANGE

Quezon City

Section32(B)(6)(b)of"the National Code of 1997, as amended BIR Ruiing No. 197-2015 r. 563-2017 12-7-2017 Intcrnal Revenuc

Makati City 1212 2363 Antipolo St., Guadalupc Nucvo, TULAY SA PAG-UNLAD, INC

Attention: LEODEGARIO B.SALUBO Comptroller

Gentlemen:

exempting from income tax thc separation benefits given to Mr. Rafael Dindo T. Cortez whd has been separated from service due to redundancy pursuant to Section 32(B)(6)(b) of the National Internal Revenue Code of 1997. as amended. This refers to your letter dated August 19, 2015. requesting for the issuance of a ruling

informing him of its effective date. technologies (OMNI Enterprise Software and Microsoft Great Plains, among others) in which development, the Comptroller now assumes all the functions and responsibilities of the Ml I'S Director, thus, requiring to permanently terminate the services of Mr. Rafael Dindo T. Cortez. its MITS Director: that on August 18. 2015. TSPI has duly filed with the Department of Iabor and Employment (DOLE). Makati-Pasay Fieid Office, the Notice of Termination due to non-profit, charitable, educational. cultural, social and civic service corporation duly registered and existing under the laws of the Republic of the Philippines with Securities and Exchange Commission (SEC) Company Registration No. operations and improve the services of the corporation to its clients. it has adopted new the staff of the Management Information Technology Services (MITS) shall be directly Rcdundancy of the aforementioned enployee and that said Notice of 'Termination was served reporting to its Comptroller, the main owner of said systems technologies; that with this It is represented that TULAY SA PAG-UNLAD, INC. (TSPI) is a domestic non-Stock that to streamline the social enterprise

No. 197-2015 dated June 10, 2015) or by his heirs from the employer as a consequence of separation of such official or employee cause beyond the control of the said official or employee shall not be inciuded in thc gross income and shall be exempt from taxation under Title il of the sane Tax Code. (BIR Ruling from the scrvice of the employer duc to death, sickness or other physical disability or for any Internal Revenue Code of 1997, as amended, any amount received by an official or employee In reply, please be informed that pursuant to Section 32(B)(6)(b) of the National

Official or employee or his heirs as a consequence of such'separation. (BIR Ruling No. 197- cmployee 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 2015 dated June 10, 2015) The above-mentioncd law requires the presence of two (2) conditions in order that the

deemed occupying redundant position as a result of his separation from the service is exempt Accordingly, the separation pay to be received by Mr. Rafael Dindo T. Cortez as

CC1

: TUAY SA PAG-UNLAD. INC

from income tax and consequently from the withholding tax prescribed by Section 79 of the (RR) No. 2-98. as amended by RR Nos. 6-2001 and 12-2001. National Internal Revenue Codc of 1997, as amended. as implemented by Revenue Regulations

pay. i.c.. 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 However, this same 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. (B1R Ruling No. 197-2015 tax. C'onversely. the cash equivalent of vacation leave exceeding ten (10) days is subject to tax. dated June 10, 2015) Moreover. pursuant to Section 2.78.1 (A)(7) of RR No. 2-98, as amended, the terminal

separated cmployees' salaries and the payment of the 13th month pay and other henefits in (A)(3)(a) and (A)(7) of RR No. 2-98, as amended by RR No. 3-2015. excess of the eighty two thousand pesos (Php82,000.00) threshold under Section 2.78.1 It is. however, understood that this exemption does not include the payment of the

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

Very truly yours.

oM

Commissioner of Interpal Revenue CAESAR R. DULAY 011652

Z-K-I-LMAT