BIR Ruling [DA-480-98]

November 4, 1998 BIR RULING [DA-480-98] American Wire & Cable Co., Inc. 8508 Km. 16 South Superhighway Paraaque, Metro Manila Attention: Mr . Severino C . Landingin, Jr . Comptroller Gentlemen : This refers to your letter dated June 11, 1998 requesting confirmation of your opinion to the effect that the separation benefits to be received by the employees named therein due to redundancy is exempt from income tax. cdLL It is represented that American Wire & Cable Co., Inc. implemented last June 9, 1998 reduction of workforce principally due to redundancy; and that there are twenty five (25) employees affected by the said program. In reply, please be informed that pursuant to Section 32(B)(6)(b) of the Tax Code of 1997, any amount received by all official or employee or by his heirs from the employer as a consequence of separation by 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 is exempt from taxes regardless of age or length of service. The abovementioned law requires the presence of these conditions in order that the employee benefits may be granted tax exemption: (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. Since the separation of the affected employees of American Wire & Cable Co. Inc., is beyond their control, any and all amounts to be received by them as a result thereof, are exempt from all taxes and consequently from the withholding tax prescribed by Section 79, Chapter XIII, Title II of the Tax Code of 1997. It is, however, understood that the payment of their salaries if any, are subject to income tax. (BIR Ruling No. UN-017-96 dated January 10, 1996) LLpr Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)