BIR Ruling No. 565-2017

BUREAU OF INTERNAL REVENUE REPURLCOF THHEPHHLIPPINFS DEPARYMENT OE FINANGY

Quezon City

8737 Paseo dc Roxas, Makati City Omya Chemical Merchants Inc. 17/F BDO PlaZa Section 32(B)(6)(b), 1997 NIRC BIR Ruling No. 479-2014 BIR Ruling No. 416 - 2012 -201 -O

Gentlemen: Attention : Ms. Purificacion S. Samson Head of Finance and Controlling

20 15 and June 1 8, 2015 requesting in effect, for the issuance of a ruling confirming that the Scparation pay given to employees of Omya Chemical Merchants, Inc. (OCMI) who have been separated from service due to the implementation of a redundancy program is exempt from withholding tax pursuant to Sec. 32(B)(6)(b) of the 1997 T'ax Code. as amended. This is to acknowledge receipt of your letters dated April 3. 2014. February 27.

the terminated employees has been found excessive and unnecessary to the operations of the company and since (CMI is unable to offer any alternative position to thesc employecs. corporation duly organized under Philippine Iaws under Securities and Exchange Commission (SEC)Company Reg. No. export and wholesale distribution of all kinds of goods, articles, commodities and wares Such as. but not limited to. chemicals. To effectively pursue its business purpose, OCMI decided to reduce its workforce due to reasons of redundancy. The positions occupied by OCMI management has reached the decision to terminate the following employees: Plaza. 8737 Paseo de Roxas, Makati City. OCMI is engaged in the business of import. Documents submitted show that OCMI (TiN and with of fice address at I 7/F BDO ) is a domestic

Name Position

Reyes. Predclito Cuaresma Deia Rea. Abigael Blanco Rebato. Reynaldo Parsan Guevarra, Ediser Timbo! DeMesa, Mervin Rebato Polondaya, Rey Priolo Umali, Donald Cataje Alicpala, Alvin Riano Costelo, Jason Cataje Dizon. Ruel Bepinoza Quillo, Alan Trinidad Erni. Cclia C Marketing Manager Driver's Helper Driver's Helper Driver's Helper Driver's Helper Driver's Helper Driver's Helper Receptionist Messenger Mechanic Driver Driver

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

20 Omya Chemical Merchans, Inc. Page 2 of'?

the employee benefits may be granted tax exemption, namely: (1) the employee is separated 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 from the service of the employer due to death, sickness or other physical disabitity or for The above-mentioned law requires the presence of two (2) conditions in order that

from employment due to reduction of workforce and that they have been duly notified of Labor and Employment (DOLE-NCR Makati/Pasay Field Office) thru Establishment their termination. Empioyment Reports stating that the above-enumerated employees have been separated Subimitted documents show that OCMI has aiready informed the Department of

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. 6-2001 and 12-2001. Accordingly, the separation pay to be received by the retrenched employees as a

pay. i.e., commutation and payment of monetized unused vacation leave credits not exceeding ten (10) days during the year are not subject to ircome tax and consequently to days is subject to tax. However, this same principle cannot apply to sick leave credits since the withholding tax. Conversely. the cash equivalent of vacation ieave exceeding ten (10) an employee must actually go on sick leave to be able to avail of said leave credits. Moreover, pursuant to Section 2.78.1 (A)(7) of RR 2-98, as amended. the terminal

98, as amended. (BIR Ruling Nos. 479-2014 dated December 3,2014 and 416-2012 dated separated employees' salaries and the payment of the 13 month pay and other benefits in excess of the Php82,000.00 threshold under Section 2.78.1 (A(3)(a) and (A)(7) of RR 2 June 25. 2012) It is, however, understood that this exemption does not include the payment of the

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

Very truly yours. a89

{102(omya-sh} K-I-RFR Commissioner of Iatemal R eyent CAESAR R. DULAY 011"65 7

1 As amended br Reventie Regaolations No. 3-20+5 dated March t3. 20+ 5