Philippine Long Distance Telephone Company (PLDT)

May 12, 2009 BIR RULING [SH-(024) 348-09] Section 32 (B) (6) (b); SB-014-2007 Philippine Long Distance Telephone Company (PLDT) P.O. Box 2148 Makati City Attention: Mila P. Ymasa Head-Payroll & Benefits Admin. Div. Gentlemen : This refers to your letter dated February 19, 2009 requesting for a ruling that the separation benefits to be paid to Mr. Luis P. Danez by reason of poor health condition are exempt from income tax pursuant to Section 32 (B) (6) (b) of the Tax Code of 1997, as amended. As represented, Mr. Luis P. Danez is an employee of PLDT as Technician; that he was diagnosed to be suffering from Cerebro Vascular Accident which renders him incapable of properly discharging his regular assigned duties without impairing his own health or endangering that of his fellow workers if he continues working; and that he was terminated from the service effective December 13, 2008 due to physical disability. 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 Mr. Luis P. Danez will receive as a result of his separation from the service of his employer including his terminal leave pay (sick leave and vacation leave credits), due to the aforesaid poor health condition are exempt from income tax and consequently from withholding tax prescribed by Section 79, Chapter XIII, Title II of the Tax Code. EHaCID It is, however, understood that the payment of his salary is not exempt from income tax and consequently from withholding tax. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service