Separation Pay - Tax-Exempt

March 10, 1993 BIR RULING NO. 092-93 SEPARATION PAY TAX-EXEMPT 28 (b) (7) (B) 050-93 092-93 PNOC Shipping & Transport Corporation S & L Building, Roxas Boulevard Manila Attention: Ms . Ma . Cristina M . Manorca Marine Personnel Manager This refers to your request for a ruling that the separation benefits to be paid to Mr. Jose C. dela Cruz 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. Jose C. dela Cruz, was certified by his attending physician, Dr. Andres Reyes, to be suffering from "RVO Antero-septal Wall Myocardial Infarction, probably Old Anterior Infarct" 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 or 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. Jose C. dela Cruz 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 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 Mr. Jose C. dela Cruz's salary. casia JOSE U. ONG Commissioner of Internal Revenue