Tax Exemption of Separation Benefits Paid to Employee Separated from Service by Reason of Health Condition

January 16, 1992 BIR RULING NO. 024-92 28 (b) (7) (B) 177-91 024-92 General Milling Corporation 6th Floor, Corinthian Plaza 121 Paseo de Roxas, Makati Metro Manila Attention: Mr . Ernesto B . Jimenez, Jr . HRD Director Gentlemen : This refers to your letter dated September 30, 1991 requesting exemption from income tax of the separation benefits of your employee, Mr. Wilfredo V. Limjuico, as a consequence of his separation from the service by reason of his health condition, pursuant to Section 28(b)(7)(B) of the Tax Code, as amended and as implemented by Revenue Memorandum Order No. 25-91. Documents submitted disclosed that Mr. Wilfredo V. Limjuico was assigned at GMC's Milk Products Division since August 9, 1982; that he is diagnosed last May 1989 as suffering from undifferentiated type of "Nasopharyngeal Cancer" and he had underwent several sessions of Cobalt Therapy and Chemotherapy at the Philippine General Hospital and St. Luke's Medical Center; that your company doctor had advised him to undergo further chemotherapy and recommended him for early retirement from the service of that company to enable him to seek further medical treatment. 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 Mr. Wilfredo V. Limjuico will receive from your company as a result of his separation from the service of your company due to ill health (sickness) 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. Very truly yours, (SGD.) JOSE U. ONG Commissioner of Internal Revenue