Li & Fung (Philippines), Inc.

February 19, 2009 BIR RULING [SB-(016) 120-09] Sec. 32 (b) (6) (b); DA-386-07 Li & Fung (Philippines),Inc. Valderrama Building, 107 Esteban Street Legaspi Village, Makati City Attention: Mr. Eliseo C. Miranda Vice-President Gentlemen : This refers to your letter dated December 21, 2008 requesting for a ruling that the separation benefits due to a cause beyond the control of the employee is exempt from withholding tax. It is represented that Mr. Mario S. Murillo is employed as a company driver of LI & FUNG (Philippines),Inc.;and that a letter was sent to Mario S. Murillo dated December 4, 2008 informing him that his services are being terminated as being declared redundant. 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 Mr. Mario S. Murillo as a result of his separation from the service of LI & FUNG (Philippines), 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-078-2000 dated February 2, 2000). aSDCIE 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service