Julieta C. Rebong

December 7, 2009 BIR RULING [SB-(052) 751-09] 32 (B) (6) (b); DA-291-92 Julieta C. Rebong 565 Lobarbio Street, Bilibiran, Binangonan, Rizal Madame : This refers to your letter dated July 29, 2009 requesting for exemption from the payment of income tax, and consequently from the withholding thereof, the separation benefits to be paid to you by CANON MARKETING (PHILIPPINES), INC. It is represented that you have been working for CANON MARKETING (PHILIPPINES), INC. for the past 17 years as an Assistant Manager for Finance. However, due to frequent hypertension attacks, you were constrained to avail of the early retirement option with CANON MARKETING (PHILIPPINES), INC. The medical certificate duly issued by a government physician Dr. Renato H. Bernardo disclosed that you are suffering from Hypertension. In reply thereto, under Section 32 (B) (6) (b) of the Tax Code, as amended, any amount received by an official or employee or by his heirs from his 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 is exempt from taxes regardless of age or length of service. 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 asked for or initiated by him. In other words, the separation must not be of his own making or choice. Since your separation from the service of CANON MARKETING (PHILIPPINES), INC. due to physical disability is beyond your control, any and all amounts to be received by you from the company as a result thereof, are exempt from all taxes and consequently from the withholding tax pursuant to Section 32 (B) (6) (b) of the Tax Code. However, the "other benefits" contemplated under Section 32 (B) (7) of the 1997 Tax Code, which are excluded from gross compensation provided the total amount does not exceed P30,000, shall include, but not limited to, the 13th month pay, productivity incentive bonus, Christmas bonus, loyalty awards, gifts in cash or in kind and other benefits of similar nature paid to an employee. With respect to the salary, it is embraced within the term "taxable compensation income" which is being defined as "all remuneration for services performed by an employee for his employer" under Sections 31 and 78 in relation to Section 32, all of the Tax Code, unless specifically exempted under Section 32 (B) of the same Tax Code. Thus, the salary constitutes taxable compensation income. (BIR Ruling No. 179-99, November 22, 1999) aATHIE 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service