Gentlemen :
This refers to your letter dated May 31, 2013, via 1st indorsement of Revenue
Region No. 13-Cebu City requesting in behalf of Customer Benefit Svcs, Inc., for
confirmation of opinion that the separation benefits and other benefits of your
retrenched employees is exempt from income tax and consequently from withholding
tax.
Documents submitted disclosed that Customer Benefit Svcs, Inc. with (TIN
401-269-745-000) is a domestic corporation primarily engaged in the business of
operating a call center enterprise, providing teleservices for foreign companies
(inbound or outbound), such as customer care, help desk, telesales, and collections
with live agents or automated response; that on May 14, 2013, Customer Benefit Svcs,
Inc. announced to its six (6) affected workers 1(1) that it will be implementing a
retrenchment program due to redundancy and the need to streamline its operations;
that on May 15, 2013, Customer Benefit Svcs, Inc. notified Department of Labor and
Employment-Cebu City of the intention of terminating the affected employees; and
that its Notices of Termination due to Redundancy to the affected employees are duly
received by them.
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
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia (2017.1) 1
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 same
Code. (BIR Ruling No. 416-2012 dated June 25, 2012) cDIHES
The above-mentioned law requires the presence of two (2) conditions in order
that the employee benefits may be granted tax exemption, namely (1) the employee is
separated 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, and (2)
the employer pays benefits to the official or employee or his heirs as a consequence of
such separation. (BIR Ruling No. 416-2012 dated June 25, 2012)
It is, however, understood that this exemption does not include the payment of
the separated employee's salaries and the payment of the 13th month pay and other
benefits in excess of the Php30,000.00 threshold under Section 2.78.1 (A) (3) (a) and
(A) (7) of RR 2-98, as amended. (BIR Ruling No. 416-2012 dated June 25, 2012)
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.
ANNEX
Middle Separation
Last Name First Name Name Position TIN # Date Hired Date
Inoc Jr. Melecio Amagos Quality Control Staff 313-356-871-000 28-Jan-13 15-Jun-13
Secretaria Cristal Jane Refuela Quality Control Staff 313-334-389-000 28-Jan-13 15-Jun-13
Footnotes
1. See Annex.
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Endnotes
1 (Popup - Popup)
1. See Annex.
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia (2017.1) 4