Separation Pay - Tax-Exempt

March 1, 1993 BIR RULING NO. 077-93 SEPARATION PAY TAX-EXEMPT 28 (b) (7) (B) 050-93 077-93 Seacom Industrial Corporation 20 Scout Tuason St. corner Dr. Lazcano St. Diliman, Quezon City 3008 Attention: Mr . Alfredo Sanvictores President This refers to your request for a ruling that the separation benefits to be paid to Mr. Marino G. San Juan 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 your employee, Mr. Marino G. San Juan was certified by your Company Physician, Dra. Marilou S. Sta. Cruz to be suffering from Primary Hypertension, Severe and that said illness affects the performance of his duties and endangers his life if he continues working. Said finding is confirmed by the BIR Medical Officer. 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. Marino G. San Juan will receive as a result of his separation from the service of your company due to the aforesaid health condition are exempt from income tax and consequently, from withholding tax as prescribed under 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 Mr. Marino G. San Juan's salary. cdt JOSE U. ONG Commissioner of Internal Revenue