BIR Ruling No. 479-14

December 3, 2014 BIR RULING NO. 479-14 Section 32 (B) (6) (b) of the Tax Code, as amended; BIR Ruling No. 416-12 Sycip Salazar Hernandez & Gatmaitan Attorneys-at-Law SyCip Law Centre 105 Paseo De Roxas, Makati City Attention: Leslie C. Dy Partner Gentlemen : This refers to your letter dated February 17, 2012 requesting for confirmation of opinion in behalf of Ford Motor Company Philippines, Inc.,(FMCP) that the separation benefits to be received by employees involuntarily terminated by reason of redundancy is exempt from income tax and consequently from withholding tax. Documents submitted disclosed that FMCP with TIN 005-029-555-000 is a domestic corporation primarily engaged in, conduct and operate the business of manufacturing, processing, exporting, importing, buying and selling at wholesale of motor vehicles, vehicle parts and components and other similar products and components of all kinds and make, as well as performing and providing all types and activities in connection thereto; that it recently ended the production of one of its models, Mazda 3 and this caused a significant drop in the total production volume, FMCP, in order to improve cist and operational efficiency of its manufacturing operations and to enable it to compete and continue to be viable in the future, implemented a restructuring within its manufacturing operations, as a result, it shall permanently terminate One Hundred Twenty Two (122) of its employees effective February 15, 2012 (see annex); and that on January 13, 2012, FMCP notified DOLE-ROIV-A Laguna Provincial Office of its intention for the reduction of workforce. In reply, please be informed that pursuant to Section 32 (B) (6) (b) of the Tax Code of 1997, as amended, 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 due to death, sickness or other 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 Title II of the same Code. (BIR Ruling No. 416-2012 dated June 25, 2012) SHTaID 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. 416-2012 dated June 25, 2012) Accordingly, the separation pay to be received by the retrenched employees as a result of their separation from the service is exempt from income tax and consequently from the withholding tax prescribed by Section 79, Chapter XIII, Title II of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98, as amended. (BIR Ruling No. 416-2012 dated June 25, 2012) Moreover, 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. 416-2012 dated June 25, 2012) It is, however, understood that this exemption does not include the payment of the separated employee's salaries and the payment of the 13th month pay and other benefits in excess of the Php30,000.00 threshold under Section 2.78.1 (A) (3) (a) and (A) (7) of RR 2-98, as amended. (BIR Ruling No. 416-2012 dated June 25, 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 Bureau of Internal Revenue ANNEX List of Affected Employees Full Name TIN Hiring Date Separation Position Separation Date Package (In Php) 1 Roman Tamayo Abrera 259126439 9/21/2004 2/15/2012 Operational Staff 219,647.22 2 Bongbong Layugan Alagar 305395390 5/16/2005 2/15/2012 Operational Staff 174,664.88 3 Mark Jason Taghap Alfaro 254582329 6/16/2005 2/15/2012 Operational Staff 189,708.14 4 William Ref il Almoradie 229889693 12/11/2003 2/15/2012 Operational Staff 273,398.58 5 Marani Daaco Alvaran 231319737 11/5/2001 2/15/2012 Operational Staff 407,646.39 6 Noel Llangco Altoveros 206924132 11/25/1998 2/15/2012 Team Leader 772,544.08 7 Cyr Willebern San Jose Ang 246338678 5/19/2005 2/15/2012 Operational Staff 204,727.50 8 Roden Batino Angeles 219310314 6/10/2002 2/15/2012 Operational Staff 359,324.58 9 Geraldo Protacio Arevalo 226652243 10/5/2007 2/15/2012 Operational Staff 136,955.80 10 Dandreb Lapic Asistio 254589096 6/20/2005 2/15/2012 Operational Staff 193,606.20 11 Gen Anthony Cesista Ayong 209064524 7/31/2000 2/15/2012 Operational Staff 511,790.95 12 Mark AI Sangalang Balaccua 249774333 5/30/2005 2/15/2012 Operational Staff 194,947.20 13 Marknel Mazo Balgomia 242623481 6/14/2005 2/15/2012 Operational Staff 201,776.08 14 Joseph Rey Bano 219311122 6/10/2002 2/15/2012 Operational Staff 387,580.62 15 Aaron Paul Bati Barachina 239181540 4/21/2005 2/15/2012 Operational Staff 194,258.86 16 Danilo Baet Barba 206924212 11/25/1998 2/15/2012 Team Leader 738,520.72 17 Nino Nestor Villanueva Barbosa 240891627 5/23/2005 2/15/2012 Operational Staff 191,699.08 18 Maria Rosario Ramal Barin 250297864 6/14/2005 2/15/2012 Operational Staff 194,922.40 19 Adrian Miclat Barundia 254588868 6/2/2005 2/15/2012 Operational Staff 202,937.24 20 John Andres Bautista 271403085 10/1/2008 2/15/2012 Operational Staff 78,767.52 21 Joey Bilolo Bides 250303260 9/21/2004 2/15/2012 Operational Staff 217,720.62 22 Herbert Gaspar Borgonia 248461227 9/2/2004 2/15/2012 Operational Staff 240,659.60 23 Joenard Villegas Borondia 219312719 6/10/2002 2/15/2012 Operational Staff 378,045.66 24 Myra Villanueva Bueno 217929536 4/22/2003 2/15/2012 Analyst 476,961.28 25 Tristan John Pascual Bunggo 206138152 8/9/1999 2/15/2012 Operational Staff 504,604.41 26 Gerard Lomeda Caling 211281814 7/31/2000 2/15/2012 Operational Staff 446,192.75 27 Nicky Dogoldogol Calvo 219313086 6/10/2002 2/15/2012 Operational Staff 375,448.74 28 Paolo Miranda Capito 245758493 4/30/2004 2/15/2012 Operational Staff 245,169.60 29 Kenneth Dalumpines Cardano 224875659 3/31/2003 2/15/2012 Operational Staff 340,095.84 30 Rogelio Barra Ceneta 206940559 11/22/1999 2/15/2012 Operational Staff 464,193.28 31 Roland Odiada Cierva 211315212 7/31/2000 2/15/2012 Operational Staff 431,624.95 32 Ferjune Urriza Condino 300343336 6/6/2005 2/15/2012 Operational Staff 197,931.40 33 Jennalyn Reyes Dadivas 225327034 10/25/2004 2/15/2012 Operational Staff 221,415.36 34 Julius Bernales Danao 213444792 7/9/2001 2/15/2012 Team Leader 653,914.08 35 Raymond Escalona de Chavez 209073907 7/31/2000 2/15/2012 Operational Staff 445,891.05 36 Cherry-lyn Bulaong De Guzman 209058640 7/31/2000 2/15/2012 Analyst 667,532.80 37 Eric Consolacion Dela Cruz 219313488 5/6/2002 2/15/2012 Operational Staff 378,794.68 38 Christine Tumbado Delvo 206148531 11/22/1999 2/15/2012 Operational Staff 720,042.24 39 Alexan Frisco Desingano 229895135 6/23/2003 2/15/2012 Operational Staff 308,815.60 40 John Wilfred Chow Doctor 245539231 9/15/2004 2/15/2012 Operational Staff 221,783.80 41 Maria Teresa Antenor Dublin 916221364 10/5/1999 2/15/2012 Operational Staff 536,538.12 42 Rogemer Villaluz Dumaran 924709437 8/17/2005 2/15/2012 Engineer 463,944.00 43 Richard Amparo Edrozo 229912517 6/20/2005 2/15/2012 Operational Staff 189,423.72 44 Alcon Pangga Eloria 245540435 4/14/2004 2/15/2012 Operational Staff 243,208.70 45 Lito Oya Era 245534874 4/21/2005 2/15/2012 Operational Staff 194,258.86 46 Ryan Dangue Filasol 305379566 5/9/2005 2/15/2012 Operational Staff 192,836.76 47 Enrico Del Gotiongco 129368167 2/1/1999 2/15/2012 Supervisor 1,589,458.85 48 Gaudioso Buan Guadalupe 224854341 3/17/2003 2/15/2012 Operational Staff 340,858.10 49 Edison Hilario Guevarra 248990777 4/14/2004 2/15/2012 Operational Staff 248,782.20 50 Maricar Hortellosa Gumba 220911637 10/21/2002 2/15/2012 Operational Staff 348,027.66 51 Felipe Abanilla Hernandez 223218195 7/31/2000 2/15/2012 Operational Staff 434,577.30 52 Reginald Manducdoc Junsay 209057924 5/6/2002 2/15/2012 Operational Staff 362,053.78 53 Patrosenio Jr. Aragon Laurio 253016340 6/6/2005 2/15/2012 Operational Staff 190,561.40 54 Angelo Siguenza Libreja 249773420 9/21/2004 2/15/2012 Operational Staff 216,238.62 55 Michael Angelo Andal Limpiada 249774238 5/30/2005 2/15/2012 Operational Staff 195,888.00 56 Michael Bustamante Londres 219315632 6/10/2002 2/15/2012 Team Leader 644,229.96 57 Jay Mark Gobot Lopez De Leon 245535010 4/21/2005 2/15/2012 Operational Staff 198,766.66 58 Stalin Marx Dimal Lopez 245540732 6/2/2005 2/15/2012 Operational Staff 190,845.82 59 John Paul Garcia Lucas 220959596 3/31/2003 2/15/2012 Operational Staff 320,146.68 60 Benjamin Penarroyo Lucero 206432253 3/1/1999 2/15/2012 Operational Staff 789,984.24 61 Michel Constantino Madero 274269942 6/2/2005 2/15/2012 Operational Staff 190,845.82 62 Renier Hernandez Malana 249774446 5/9/2005 2/15/2012 Operational Staff 201,284.64 63 Alexander Dela Cruz Mallari 206159392 11/22/1999 2/15/2012 Operational Staff 538,652.80 64 Crisostomo Lucas Manuel 206932606 11/25/1998 2/15/2012 Supervisor 1,244,897.08 65 Raymund Reyes Marquez 205919805 11/25/1998 2/15/2012 Team Leader 823,509.40 66 Eric Bancual Martin 221650174 1/14/2002 2/15/2012 Operational Staff 381,337.20 67 Lamberto Isagunde Matienzo 249798840 6/20/2005 2/15/2012 Operational Staff 184,934.88 68 Norman Isagunde Matienzo 206932710 11/22/1999 2/15/2012 Operational Staff 499,732.80 69 Romel Mercado Millena 236973674 6/20/2005 2/15/2012 Operational Staff 189,423.72 70 Willy Lorenton Mirasol 218613212 4/22/2002 2/15/2012 Operational Staff 342,103.66 71 Ryan Albert Alibadbad Moral 282401804 10/27/2003 2/15/2012 Operational Staff 289,021.80 72 Eric Geraldo Moralde 250293310 5/24/2004 2/15/2012 Operational Staff 243,283.68 73 Rico Jay Bengal Morales 206160447 3/1/1999 2/15/2012 Analyst 744,457.70 74 Jan Michael Karamihan Naceno 239278131 9/26/2005 2/15/2012 Analyst 403,873.56 75 Anson Sarmiento Noblefranca 246338276 5/30/2005 2/15/2012 Operational Staff 191,130.24 76 Edsel Polo Nufuente 206160894 8/9/1999 2/15/2012 Operational Staff 497,169.51 77 Salvador Diaz Orogo 206933615 11/23/1999 2/15/2012 Operational Staff 466,039.20 78 Cresin Urriza Ortega 213468378 8/1/2001 2/15/2012 Operational Staff 413,671.50 79 Reynaldo Legaspi Pabale 224855745 4/22/2003 2/15/2012 Operational Staff 315,955.06 80 Alven Enojosa Pabia 249805298 6/6/2005 2/15/2012 Operational Staff 191,901.40 81 Bryant Razal Pabustan 254584749 6/20/2005 2/15/2012 Operational Staff 194,338.80 82 Eric Soriano Palero 245755119 6/23/2005 2/15/2012 Operational Staff 191,586.50 83 Jeffry Castillo Palomares 254586955 5/16/2005 2/15/2012 Operational Staff 192,267.92 84 Rodolfo Terrible Paz 213454680 7/13/2001 2/15/2012 Team Leader 715,438.00 85 Leonilyn Germino Penero 221653007 11/11/2002 2/15/2012 Operational Staff 353,631.96 86 Ronaldo Narito Pereyra 252575443 6/6/2005 2/15/2012 Operational Staff 190,561.40 87 Vincent Carlo Guido Perez 250997837 5/30/2005 2/15/2012 Operational Staff 200,712.96 88 Paul Milfred Tacorda Pestano 247780647 5/23/2005 2/15/2012 Operational Staff 191,699.08 89 Irma Losigro Pimentel 232350614 11/5/2001 2/15/2012 Operational Staff 426,008.84 90 Winnie Masangcay Pineda 219261005 11/5/2001 2/15/2012 Operational Staff 389,994.09 91 Jonie Roy Garcia Ramos 305395260 6/16/2005 2/15/2012 Operational Staff 180,383.48 92 Rogie Ginete Ravello 219315829 6/10/2002 2/15/2012 Operational Staff 365,991.30 93 Herbert Eleuterio Rayupa 247779494 5/23/2005 2/15/2012 Operational Staff 203,588.44 94 Marvin Panopio Reyes 247353724 5/30/2005 2/15/2012 Operational Staff 191,130.24 95 Jobert San Jose Ricamata 234967090 3/31/2003 2/15/2012 Operational Staff 313,016.90 96 Gilbert Taneca Robles 219302899 5/22/2002 2/15/2012 Operational Staff 360,574.50 97 Ruel Paquita Rojo 928964051 5/24/2004 2/15/2012 Operational Staff 246,844.08 98 Fritzie Subang Sabaldana 219303026 5/22/2002 2/15/2012 Operational Staff 386,782.50 99 Jophree Revelo Sagun 206052915 3/29/1999 2/15/2012 Operational Staff 520,906.30 100 Loyd Dolendo Salimbacod 219266573 6/10/2002 2/15/2012 Operational Staff 361,437.00 101 Jackie Ian Maque SanLuis 213472932 8/1/2001 2/15/2012 Operational Staff 414,000.30 102 Rolando Punzalan Santos 244827432 6/16/2008 2/15/2012 Operational Staff 96,476.96 103 Airene Gloriba Semaning 206254012 10/5/1999 2/15/2012 Operational Staff 504,355.68 104 Michael Manaois Somera 228124503 10/27/2003 2/15/2012 Operational Staff 284,052.42 105 Rudy Recrio Suba 249806007 6/6/2005 2/15/2012 Operational Staff 190,561.40 106 Clifton Guinaling Tagalog 219267201 5/22/2002 2/15/2012 Operational Staff 365,059.50 107 Antoinette Lucino Tanedo 206171258 8/9/1999 2/15/2012 Operational Staff 528,914.28 108 Abelardo Banaticla Tangcangco 206175701 2/8/1999 2/15/2012 Analyst 803,700.94 109 Aquilina Silva Tangonan 206170265 12/6/1999 2/15/2012 Operational Staff 527,354.24 110 JoseIito Asuncion Tarlino 224876598 3/31/2003 2/15/2012 Operational Staff 344,114.12 111 Aaron Sarmiento Tijing 219267507 5/22/2002 2/15/2012 Operational Staff 365,059.50 112 Antonio Sarmiento Tijing 222283232 5/30/2005 2/15/2012 Operational Staff 191,130.24 113 Ruel Amarille Uayan 263937354 5/23/2005 2/15/2012 Operational Staff 191,699.08 114 Isagani Medina Valencia 248991836 10/25/2004 2/15/2012 Operational Staff 227,139.60 115 Paul Art Veras 220210108 6/23/2003 2/15/2012 Operational Staff 306,286.88 116 Jason Carlos Villagracia 224874098 4/22/2003 2/15/2012 Operational Staff 313,800.54 117 Nickson Surban Villalon 404170372 10/1/2008 2/15/2012 Operational Staff 78,767.52 118 Jacinto Visaya Villanueva 219309369 5/6/2002 2/15/2012 Operational Staff 397,043.24 119 Nemencio Visaya Villanueva 238803861 5/30/2005 2/15/2012 Operational Staff 195,350.40 120 Nicolas Banaticla Villegas 224873046 4/22/2003 2/15/2012 Operational Staff 309,420.86 121 Alvin Gutierrez Viray 219309552 5/22/2002 2/15/2012 Operational Staff 374,224.50 122 Rosenda Dazo Yamba 221650406 11/11/2002 2/15/2012 Team Leader 512,705.16