BIR Ruling No. 093-83

June 1, 1983 BIR RULING NO. 093-83 Gentlemen : This refers to your letter dated September 7 and December 16, 1982, requesting opinion as to whether or not the retirement and gratuity benefits received by your client, Mr. Ricardo Lacson, who was separated from the service of the Traders Royal Bank due to sickness are subject to withholding tax. The certification issued by the Bank in response to a verification made by this Office disclosed that your client's resignation took effect on June 30, 1982, at the age of 43 years, 9 months and 26 days after 19 years and 24 days of service in the said Bank on account of illness as duly certified by the Bank's physician, Dra. Cecilia L. Montalban, of the Traders Royal Bank Clinic who conducted his physical examination; that on account of said illness, the Bank accepted your client's resignation; and that as a member of the Traders Royal Bank Retirement Plan, he received retirement benefits in the amount of P240,726.08, which was subjected to the withholding tax in the amount of P55,382.34. cdta In reply thereto, I have the honor to inform you that pursuant to Section 29(c)(7)(B) of the Tax Code, as amended, any amount received by an official or employee or by his heirs from his 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 is exempt from taxes regardless of age or length of service. In view thereof, this Office is of the opinion, as it hereby holds that, any and all amounts received by Mr. Ricardo Lacson from Traders Royal Bank as a result of his separation from the service of the Bank due to sickness are exempt from all taxes and consequently from withholding tax prescribed by Section 91, Chapter XI, Title II of the Tax Code, as amended by Batas Pambansa Blg. 135 and implemented by Revenue Regulations No. 6-82 dated October 1, 1982. It is, however, understood that this tax exemption does not include the Bank's payments for the salary and cash equivalent of accumulated vacation and sick leaves, if any, of Mr. Lacson. Finally, the income tax withheld from the separation pay of Mr. Lacson should be refunded to him in accordance with Section 295 of the Tax Code. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner Bureau of Internal Revenue