Request for Exemption from Withholding Tax of the Separation Benefits Received as a Result of Separation from the Service

February 18, 1992 BIR RULING NO. 052-92 28 (b) (7) (B) 018-92 052-92 Ms. Purita Principio 570 A. Mabini Street Quisao, Pililla, Rizal Dear Madam : This refers to your letter dated January 28, 1992 requesting exemption from withholding tax of the separation benefits which you received as a result of your separation from the service of the Royal Undergarments Corporation, effective September 25, 1991 due to ill health. It is represented that you have been employed as a factory worker of Royal Undergarments Corporation for twenty-five (25) years; that due to ill health which the Ministry of Health, Pasig Medical Center diagnosed as schizophrenia, paranoid, you were separated from the service of said Company as of September 25, 1991; that you were granted a separation pay out of which the amount of P18,000.00 was withheld by the Company for income tax purposes. 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 said official or employee shall not be included in gross income and shall be exempt from taxation under Title II of the Tax Code. Based on the foregoing, this Office is of the opinion as it hereby holds that any and all amounts which you received from Royal Undergarments Corporation as a result of your separation from the service of said company due to your 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. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue