Ms. Loretta C. Vianzon

November 5, 2009 BIR RULING [SB-(050) 697-09] Secs. 32 (B) (6) (b) and 79; DA-462-99 dated August 11, 1999; DA-068-00 dated February 2, 2000 Ms. Loretta C. Vianzon No. 22 Lincoln St., San Francisco Del Monte Quezon City Madam : This refers to your letter dated July 6, 2009 requesting for a ruling that the separation benefits to be paid to you by your employer Bank of the Philippine Islands by reason of your health condition are exempt from income tax. CSHcDT Documents submitted to this Office show that you are suffering from "MALIGNANT DERMATOFIBROSARCOMA" according to the Certification dated January 29, 2009 issued by Dr. Matias V. Timbang, OIC, Division of Medical Examination and Department Infirmary, Jose Reyes Memorial Medical Center, Department of Health and "DERMATOFIBROSARCOMA PROTUBERANS (DFSP), PREAURICULAR MASS (LEFT)" according to the Surgical Pathology Report dated August 31, 2007 issued by the Department of Pathology, United Doctors Medical Center. In reply thereto, please be informed that pursuant to Section 32 (B) (6) (b) of the Tax Code, 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 because of death, sickness or other physical disability or for any cause beyond the control of the said official or employee, shall not be included in gross income and shall be exempt from taxation. The phrase "for any cause beyond the control of the said official or employee" connotes involuntariness on the part of the official or employee. The separation from the service of the official or employee must not be used for or initiated by him. In other words, the separation must not be of own making or choice (BIR Ruling DA-462-99 dated August 11, 1999). In view of the foregoing, the separation benefits, including terminal leave pay you received from Bank of the Philippine Islands are exempt from income tax and consequently from the withholding tax. The payment of salaries, however, is subject to income tax and consequently to withholding tax. (BIR Ruling DA-068-00 dated February 2, 2000). 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. DacASC Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service