Mr. Roman Felipe S. Reyes

February 17, 2009 BIR RULING [SB-(013) 102-09] Sec. 32 (B) (6) (b); DA-283-06 Mr. Roman Felipe S. Reyes Jefferson St., Greenhills San Juan, Metro Manila Sir : This refers to your letter dated December 23, 2008 requesting for a ruling that the separation benefits to be received by the departing partners from their separation from SGV & Co., due to causes beyond their control be considered exempt from income tax and consequently, not subject to withholding tax pursuant to Section 32 (B) (6) (b) of the Tax Code of 1997, as amended. As represented, the SGV Ernst & Young Far East Area (SGV-EY FEA) integration which is undertaken to reduce costs, enhance shared services within the Far East Area (FEA), and align strategies and resources with strategic FEA priorities will result in a manpower complement in SGV that is not consistent with the current organizational structure; that to effect the necessary changes in manpower structure, some partners [all of whom below the managing partner level, e.g., Chief Financial Officer (CFO) and Vice Chairman Industries], all considered employees of the partnership, who fall outside SGV-EY FEA rules and conditions will need to be separated; and that the separation is due to causes beyond the control of these departing partners. 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 Tax Code. In view thereof, this Office is of the opinion, as it hereby holds, that any and all amounts which the departing partners will receive as a result of their separation from the service of SGV & Co. due to causes beyond their control, are exempt from income tax and consequently from withholding tax prescribed by Section 79, Chapter XIII, Title II of the Tax Code. (BIR Ruling No. DA-283-06 dated April 26, 2006) aEAcHI Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Services