Petron Corporation

March 26, 2010 BIR RULING [SB-(001) 011-10] Sec. 32 (b) (6) (b); DA-383-06; DA-627-07; BIR Ruling No. 093-83 Petron Corporation Petron Mega Plaza, 358 Sen. Gil Puyat Avenue Makati City Attention: Mr. Freddie P. Yumang Vice President Gentlemen : This refers to your letter dated November 23, 2009 requesting in behalf of your employee, Danilo N. Baluyot, for tax exemption for the medical termination benefits pursuant to Section 32 (b) (6) (b) of the Tax Code of 1997. It is represented that Danilo N. Baluyot ("Mr. Baluyot") was hired on August 1, 1995 and has been with the Company for the past 14.3 years with a monthly base pay of P49,263.38; that Mr. Baluyot was separated from Petron Corporation Refining Division effective October 16, 2009; that in accordance with your Company policy, Mr. Baluyot is eligible for medical termination due to his condition as cited in the attached letter of the company physician, which was also attested to by a previous local government Ophthalmologist based in Balanga City, Bataan; that included in your request is a medical certificate from Dr. Amadeo Veloso, Jr., Ophthalmologist (Retina Specialist) of the Asian Eye Institute; that the Company benefits policy provides for medical termination benefits equal to two months base pay for every year of service, equivalent to P1,841,650.07 for Mr. Baluyot; that based on the medical findings, Mr. Baluyot's capability to perform as a rotating equipment technician is now untenable and compromised because of visual deficiency and the sensitive status of his sensitive eye render him unfit, unsafe and unhealthy to further retain his position as a rotating equipment technician; and that since this is a type of involuntary separation, hence this request. ADcHES 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 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 Tax Code. Accordingly, this Office hereby holds that any and all amounts to be received by Danilo N. Baluyot as a result of his separation from the service of Petron Corporation Refining Division are 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. The payment of salaries, however, is subject to income tax and consequently to withholding tax (BIR Ruling No. DA-383-06 dated June 21, 2006). This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service