Separation/Retirement Pay Tax Exempt

January 11, 1993 BIR RULING NO. 001-93 SEPARATION/RETIREMENT PAY TAX EXEMPT 28 (b) (7) (B) 277-92 001-93 Lepanto Consolidated Mining Co. BA-Lepanto Building 8747 Paseo de Roxas Makati, Metro Manila Attention: Mr . Catalino Macaraig, Jr . Senior Vice-President and Chairman-Retirement Committee This refers to your request for a ruling that the separation benefits to be paid to Messrs. Henry Ikitan and Macwed Lacochao by reason of health condition are exempt from all taxes pursuant to Section 28(b)(7)(B) of the Tax Code, as amended. Documents submitted show that the aforementioned employees were certified by your Company Physician, Dr. William K. Campos to be suffering from: 1. Henry Ikitan total blindness secondary to retinal detachment of both eyes; and 2. Macwed Lacochao toxic metabolic encephalopathy diffuse, seizure disorder with impaired cognitive facility; that their respective illness affects the performance of their respective duties and would endanger their physical well-being if they continue working; and that by reason of the said findings, they were declared to be unfit for work and were advised by your said physician to retire from their work. Said findings are confirmed by the BIR Medical Officer. aisa dc In reply, please be informed that pursuant to Section 28(b)(7)(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 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 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 the foregoing employees will receive as a result of their separation from the service of your company due to the aforesaid health condition are exempt from income tax and consequently, from withholding tax prescribed by Section 72, Chapter 10, Title II of the Tax Code, as amended by B.P. Blg. 135 and implemented by Revenue Regulations No. 6-82, as amended. It is however, understood that this exemption does not include your payments of Messrs. Henry Ikitan and Macwed Lacochao's salaries. EUFRACIO D. SANTOS Deputy Commissioner (Officer-in-Charge)