Mr. Samson B. So

January 8, 2009 BIR RULING [SB-(D-001) 008-09] Sec. 32 (b) (6) (b); DA-386-07 Mr. Samson B. So 4232 Guyabano Extension NAPICO, Manggahan, Pasig City Sir : This refers to your letter dated December 11, 2008 requesting for a ruling that the separation benefits due to physical disability are exempt from withholding tax. ESHAIC It is represented that you are an employee of Lunar Steel Corporation located at Maybunga, Pasig City; that you have been employed with Lunar Steel Corporation for the past 33 years; that an undated certification issued by Primo B. Valenzuela, MD state that considering your present health status, the chronicity of the illness make you unfit to resume work and were advised to stop working or opt for early retirement; that upon release of this ruling, you will tender your resignation from your employer; that you have been diagnosed as to having Hepatic Abscess, S/P drainage, exploratory laparotomy, diabetes mellitus. 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. Samson B. So as a result of his separation from the service of Lunar Steel Corporation 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). 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. CHTAIc Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service