Taxability of Separation Benefits to be Paid to Employee by Reason of Health Condition be Exempt from All Taxes

March 19, 1992 BIR RULING NO. 092-92 28 (b) (7) (B) 053-92 092-92 Rustan Commercial Corporation El Mercasol Bldg. EDSA, Mandaluyong Metro Manila Attention: Ms . Asuncion L . Salvador Personnel Manager Gentlemen : This refers to your letter requesting a ruling that the separation benefits to be paid to Ms. Aida C. Barsolaso by reason of health condition be exempt from all taxes pursuant to Section 28(b)(7)(B) of the Tax Code, as amended. Documents submitted show that your employee, Ms. Aida C. Barsolaso was certified by your Company Physician, Dr. Adoracion M. Vergara, to be suffering from chronic allergic rhinosinusities and progressive hearing loss; and that said illness affects the performance of her duties and endangers her life if she 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 Ms. Aida C. Barsolaso will receive from you as a result of her separation from the service of your company due to her 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. It is however, understood that this exemption does not include your payment of Ms. Aida C. Barsolaso's salary. aisadc Very truly yours, JOSE U. ONG Commissioner of Internal Revenue