Bank of Florida, Inc.

April 12, 2016 BIR RULING NO. 118-16 Section 32 (B) (6) (b), 1997 NIRC; BIR Ruling No. 555-2012; BIR Ruling No. 425-2011; BIR Ruling No. 008-2011 Bank of Florida, Inc. McArthur Highway, Dolores City of San Fernando, Pampanga Attention: Ms. Gina T. Vallejo Human Resources Group Head Gentlemen : This refers to your letter dated January 13, 2014 requesting for the issuance of a certificate of tax exemption on the separation pay given to officers and employees of Bank of Florida, Inc. who have been separated from service due to cessation of the latter's business pursuant to Sec. 32 (B) (6) (b) of the 1997 Tax Code, as amended. Documents submitted show that Bank of Florida, Inc. (TIN 000-812-887-000) is a domestic corporation organized and registered with the Securities and Exchange Commission (SEC) under Company Reg. No. 24508. It is formed for the purpose of carrying and engaging in the business of extending rural credits to small farmers and tenants and to deserving rural industries or enterprises. Bank of Florida, Inc. will cease its operation on December 31, 2013 due to consolidation with Bank of Lubao effective January 1, 2014 and the new consolidated bank will henceforth be known as BOF, Inc. operating under the business name and style of Bank of Florida (A Rural Bank). As a result of the consolidation all the employees of Bank of Florida, Inc. will be severed from their employment. The following is the list of workers that will be separated from employment: Name of Employee Position 1. Abanilla, Maricel C. Supv II-Branch Head 2. Adriano, Ginalyn I. Accounting Assistant 3. Aftong, Edna M. Asst. Manager I/Branch Head 4. Aguilar, Noel M. ARD Assistant 5. Alfonso, Ryan David I. Account Asst. I 6. Atienza, Lovelyn R. Teller 7. Bacani, Noel G. Sr. Mngr. I-ASecO/Remedial Center 8. Bagang, Krizia E. Teller 9. Balisi, Hazel G. Supv IV-Branch Head 10. Baluyut, Corazon C. Supv II-PA/AA 11. Baluyut, Maila C. Supv I-AcD 12. Baron, Johanna Winshmela C. Teller 13. Barrera, Jenalyn Joy S. Teller/Cashier 14. Batas, Maria Charo A. Chief Compliance Officer 15. Bello, Michael Dennis R. Asst. Mngr. II-Hardware Dept. Head 16. Beltran, Maritell F. Supv II-Accountant 17. Binuya, Rona Q. AVP II-BOG 18. Cachero, Christer Jopseph S. Supv I-ICTG Supervisor 19. Cachero, Ma. Ethel Joy A. Supv II-TQMG OIC 20. Camaya, Rowena Ann S. Teller 21. Canlas, Adalia S. Supv II-Branch Head 22. Canlas, Gloria G. Project Development Supv II 23. Carlos, Teresa D. Chairman/President 24. Castro, Grace D. Sr. Mngr. I 25. Cayabyab, Liana Lynn Z. Supv I-PDMD 26. Completo, Cristy C. Accounting Assistant 27. Concepcion, Albert P. Rediscount Asst. I 28. Concepcion, Sandra Karolyn G. Accounting Assistant 29. Cortez, Airalyn M. Teller/Cashier 30. Cruz, Jo Ann S. Admin. Assistant II 31. Cunanan, Francis M. Supv II-Credit Investigator 32. David, Dale Dennis M. Senior Executive Vice-President II 33. De Leon, Ignacio T. Supv III-ABG Account Supervisor 34. Dela Cruz, Anniechel L. Supv I-SF Custodian 35. Dela Cruz, Dolly D. Sr. Mngr. I-Account Officer 36. Delos Santos Mary Joyce P. Supv II 37. Deniega, Sherwin P. DMJ 38. Descanzo, Irma T. Posting/Accounting Asst. 39. Dimacali, Karen M. Supv I-Cashier 40. Dizon, Meryann Frances F. Supv II 41. Duya, Jennifer D. Supv III-Branch Head 42. Enierga, Mary Anne M. Supv I-Cashier 43. Escalante, Cecile G. AVP I-ICTG 44. Evangelista, Einar B. VP I-Credit Group 45. Evaristo, Eric C. Teller/Cashier 46. Fajardo, Arden John I. Supv II-Account Supervisor 47. Ferry, Criselda U. Supv II-PuD 48. Figueroa, Gina Jousef C. CeCD Asst. 49. Flores, Roxanne C. Account Assistant 50. Galang, Ama Fe S. Supv III-Branch Head 51. Garcia, Catrine M. Teller I 52. Garcia, Daisy D. Teller I 53. Garcia, Johny D. PMD Assistant 54. Garcia, Mary Rose D. Supv I-RTD Head 55. Gasparillo, Eslie D. Teller I 56. Gonzales, Francis R. Supv I-Credit Investigator 57. Guanzon, Remedios C. Supv III-Cashier 58. Guina, Angeli Grace J. Teller/Cashier 59. Gutierrez, Jennylyn M. Teller I 60. Jaype, Beverly R. Supv IV-Branch Head 61. Juarez, Camille Monlea E. Loan Subsidiary Assistant 62. Lagman, Jayson M. Asst. Manager I-Software Dept. Head 63. Lalic, Arcel T. Treasury Asst. II 64. Lao, Nida S. AVP II-AAMG Head 65. Lapuz, Jocelyn A. Supv II/BH Reliever 66. Lising, Marina M. Supv II 67. Lopez, Lita P. Asst. Mngr. I-AcD Head 68. Lugay, Alfie D. Supv IV-Account Supervisor 69. Malabanan, Hail D. Supv IV-Branch Banking Trainer 70. Malabanan, Judy Annemarie C. Sr. Mngr. II 71. Mallari, Kashmere B. Loan Subsidiary Asst. I 72. Mallari, Kenneth M. Posting Assistant 73. Mallari, Laarnica E. Posting Assistant 74. Manalad, Jessica S. Teller I 75. Manalang, Gilbert M. M/J 76. Manlastas, Julie Ann B. Admin. Asst. I 77. Manalo, Zarah Camille P. Teller I 78. Manaloto, Theresa L. Posting Assistant 79. Mananquil, Aiza P. Posting Assistant 80. Manansala, Roel F. DMJ 81. Manarang, Monina C. Teller/Cashier 82. Mangalus, Cristina O. AVP II-ASD & PuD 83. Mangio, Kimberly I. Teller Reliever 84. Maniago, Lavinia G. Teller I 85. Maninang, Erlisa C. Asst. Mngr. II 86. Maru, Monico Andrew G. Liason Assistant 87. Mendez, Jovelyn M. Supv II-Cashier 88. Mendoza, Catherine P. Teller I 89. Mercado, Dimple Kaye V. Admin Assistant 90. Mercado, Ernesto Jr. S. Supv I-PMD Head 91. Mercado, Gil V. M/J 92. Miranda, Dominador F. M/J 93. Montano, Marian A. Asst. Mngr. II 94. Morilla, Maria Salvacion R. Asst. Mngr. I 95. Nunga, Susan D. Senior Executive Vice-President III 96. Ocampo, Carmelo M. Supv III-Account Supervisor 97. Oloquino, Janet V. Supv III-Branch Head 98. Ortanez, Peter John M. CrG Assistant 99. Pablio, Joanna N. Teller/Cashier 100. Paguio, Myrin M. Asst. Mngr. I-LAG Head 101. Panganiban, Jaime P. EVP I-Lending Operations 102. Pangilinan, Dave G. Supv I 103. Patiu, Ma. Lourdes R. Teller I 104. Paule, Ma. Fe C. Mngr. I 105. Perez, April G. Supv I-BSF Custodian 106. Pucut, Marijane C. Teller/Cashier 107. Pulido, Analiza O. Senior Executive Vice-President I 108. Quiambao, Sydney C. Supv IV-CeCD Head 109. Quibal, Cherie Lyn C. Accounting Assistant 110. Quizon, Liza G. Mngr. I 111. Ramirez, Reiza Ana R. Posting Assistant 112. Regala, Christine C. Accounting Asst. 113. Reyes, Joy Katherine R. Supv I-Accountant 114. Roberto, Rowena D. Supv II-Branch Head 115. Romero, Cristian A. Teller I 116. Sagum, Prima V. Teller/Cashier 117. Salazar, Eva R. Supv II-Branch Head 118. Salonga, Rose Ann G. Payroll Asst. I 119. Salvador, Odessa A. Sr. Mngr. I-Chief Internal Auditor 120. Sampang, Anabelle C. IAG Assistant 121. Sampang, Apple Jane B. Teller I 122. Santos, Erica Q. PDMD Assistant 123. Sarmiento, Antonio S. DMJU 124. Sarmiento, Peter M. Teller Reliever 125. Sason, Desiree M. Mngr. I-Branch Manager 126. Sason, Jeffrey C. Asst. Mngr. II-Account Officer 127. Serzo, Cristina M. Accounting Asst. 128. Suba, Jennavee U. Teller/Cashier 129. Susi, Alex Murphy C. Loan Subsidiary Assistant 130. Tadeo, Richard C. Asst. Mngr. I 131. Tapang, Arceli M. Supv III-Teller 132. Tasipit, Pebbles Q. TQMG Assistant 133. Tengco, Christopher C. Loan Subsidiary Assistant 134. Tiamzon, Louie C. Asst. Mngr. I 135. Ticsay, Corina D. Posting Assistant 136. Timbol, Elenita L. Supv I-Posting Asst. 137. Tolentiono, Aljun R. APD OIC 138. Tongol, Annete G. Mngr. II-Branch Manager 139. Tongol, Cicero M. Supv I 140. Tolention, Ethel C. Posting Assistant 141. Tuazon, Mark Gil D. ICTG Assistant 142. Tungul, Julie M. ABG Assistant 143. Vallejo, Gina T. Senior Manager I-HRS Head 144. Ventura, Ronnie V. Supv I-Account Supervisor 145. Vergara, Aiza Marie L. Posting Assistant 146. Vertudes, Jerald G. Credit Investigator 147. Vitug, Percival R. M/J 148. Wong, Harvey C. Supv II-ASD Head the Establishment Termination Report was duly received by Department of Labor and Employment-Pampanga Field Office on November 29, 2013, and the corresponding Notices of Termination of Employment to the affected employees are duly received by the afore-stated workers. caITAC In reply, please be informed that pursuant to Section 32 (B) (6) (b) of the Tax Code of 1997, any amount received by an official 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 because of 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 phrase "for any cause beyond the control of said official or employee" connotes involuntariness on the part of the official or employee. The separation from the service of the official or employee must not be asked for or initiated by him. This Office has had several occasions to rule that 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. (BIR Ruling No. 008-11 dated 19 January 2011) In view thereof, this Office is of the opinion that since it appears that the employees of Bank of Florida, Inc., as enumerated herein have proven to have been separated from the service of the employer because of consolidation, a cause beyond the control of said employees, any amount to be received by them as a consequence of said separation is exempt from income tax and consequently from the withholding tax prescribed under Section 79, Chapter XIII, Title II of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98, as amended by Revenue Regulations Nos. 6-2001 and 12-2001. Accordingly, no withholding taxes shall be deducted from the separation benefits and the entire amount thereof shall be given to the entitled separated employee. (BIR Ruling No. 425-11 dated November 4, 2011) Also, pursuant to Section 2.78.1 (A) (7) of RR 2-98, as amended, the terminal pay, i.e. , 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 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. (BIR Ruling No. 425-11 dated November 4, 2011) It is, however, understood that this exemption does not include the payment of the separated employees' salaries and the payment of the 13th month pay and other benefits in excess of the Php82,000.00 1 threshold under Section 2.78.1 (A) (3) (a) and (A) (7) of RR 2-98, as amended. (BIR Ruling No. 555-12 dated September 6, 2012) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. As amended by Revenue Regulations No. 3-2015 dated March 13, 2015.