BIR Ruling No. 526-2017

REPUBIICOF THE PHHHPPINES

DEPar'mFNI OF FInAnGE BUREAU OF INTERNAL REVENUE

Quezon City

National [Section 32(B)(6)(h) of the Code of 1997. as amended BIR Ruling No. 197-2015 7E26-2017 Internal Rcvenuc

11-17-20 17

Cuenco Ave., Kasambagan, Cebu City ABOITIZ FOUNDATION, INC. Aboitiz Corporate Center. Gov. Manucl A.

Attention: XAVIER JOSE ABOITIZ Trustee

Gentlemen:

a ruling confirming that the separation pay given to employees of ABOITIZ implementation of a redundancy program is exempt from withholding tax pursuant to Sec. 32(B)(6)(b) of the National internal Revenue Code of 1997, as amended. FOUNDATION. This refers to your letter dated August 24, 2015, requesting for the issuance of iNc. who have been separated from' service due to the

to a company-wide restructuring wherein certain positions were considered as feasible domestic non-stock. non-profit entity duly registered and existing under the laws of the Philippines with Securities and Fxchange Commission (SFC) Company Registration Foundation is part of. through the Office of the Vice-President for Human Resources of the Aboitiz Equity Ventures, issued a management memoranda announcing the relocation of thc'company's head officc from Cebu to Manila; that the pianned relocation, which involved moving employees out of Cebu, made it necessary for the management to review and rationalize its current workforce structure, with the aim of placing the right number of qualified people in the organization: that the review resulted for merging with other cxisting positions while others were deemed operationally unnecessary: that as a consequence, certain existing positions were taken out in the Foundation's plantilla leading to a workforce reduction; that months after the initial to permanently terminate the services of Rowena Ruiz Astifto. its Manager- Department of Labor and Employment (DOLE), Cebu City, the Notice of Termination due to Redundancy of the aforementioned employee and that said Notice of No. relocation announcement. several redundant positions were identified. thus. requiring Administration, Enterprise Development and Primary Health Care, effective March 3 t. 2015; and that on February 26' 2015. the Foundation has duly filed with the Termination was served informing her of its effective date. It is represcntcd that ABOITIZ FOUNDATION, INC. (Foundation) is a that on November 14. 201l, the Aboitiz Group. of which the

Internal Revenue Code of 1997, as amended. any amount received by an officiai or official or employee from the service of the employer due to death. sickness or other 11 of the same T`ax Code. (B1R Ruling No. 197-2015 dated June 10, 2015) employee or by his heirs from the employcr as a conscquence of separation of such 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 T'itle In reply, please be informed that pursuant to Section 32(B)(6)(b) of the National

that the employee benefits may be granted tax exemption, namely (1) the employee is The above-mentioned law requires the presence of two (2) conditions in order

AROTZFOINDA THN, ING + 6-2017 0

separated from the service of the employer due to death. sickness or other physical the employer pays henefits to the official or employee or his heirs as a consequence of Such separation. (BIR Ruling No. 197-2015 dated June 10, 2015) disability or for any causc beyond the control of the said official or cmployee, and (2)

deemed occupying redundant position as a resuit of her separation from the service is Section 79 of the National !nternal Revenue Code of 1997, as amended, as implemented by Revenuc Regulations (RR) No. 2-98, as amended by RR Nos. 6-2001 and 12-2001. excmpt from income tax and consequently from the withholding tax prescribed by Accordingly, the separation pay to be received by Rowena Ruiz Astillo as

sick Icave credits since an employce must actually go on sick leave to be able to avaii of said leave credits. (BIR Ruling No. 197-2015 dated June 10, 2015) terminal pay. i.e., commutation and paymcnt of monetizcd unuscd vacation leave conscquently to the withholding tax. Conversely. the cash equivalent of vacation leave exceeding ten (10) days is subject to tax. However, this same principle cannot apply to credits not exceeding ten (10) days during the year are not subject to income tax and Moreover, pursuant to Section 2.78.1 (A)(7) of RR No. 2-98, as amended. the

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

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

Very truly yours,

1an

Commissioner of Internal Revenue CAESAR R. DULAY +. y 011204

C-K-I-L.MAT

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