Kings Mills, Inc.

May 4, 2010 BIR RULING [SB-(002) 020-10] Sec. 32 (b) (6) (b); DA-383-06; DA-627-07; BIR Ruling No. 093-83 Kings Mills, Inc. Rm. 1501 Tytana Building Plaza Lorenzo Ruiz, Binondo, Manila Attention: Mr. Howard A. Chia Vice President Gentlemen : This refers to your letter dated February 10, 2010 requesting in behalf of your employee, Nestor D. Aguila, for tax exemption for the medical termination benefits pursuant to Section 32 (b) (6) (b) of the Tax Code of 1997. ECcTaS It is represented that Nestor D. Aguila, 54 years of age, and a regular employee of Kings Mills, Inc. from November 25, 1976 to January 20, 2010 was forced to retire upon recommendation of his doctor that he was no longer fit to work because of his current sickness, Coronary Heart Disease, Three-Vessel Involvement; and that since this is a type of involuntary separation, hence this request. 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 Nestor D. Aguila as a result of his separation from the service of Kings Mills, Inc. 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. SAHEIc Very truly yours, Commissioner of Internal Revenue By: (SGD.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service