Tax Exemption of Separation Benefits Paid to Employee Separated from Service by Reason of Health Condition

March 19, 1992 BIR RULING NO. 096-92 28 (b) (7) (B) 255-91 096-92 Victoria Manufacturing Corporation Barangay Sta. Lucia, Pasig Metro Manila Attention: Mr . Edwin Z . de Leon Personnel Manager Gentlemen : This refers to the request for a ruling that the separation benefits to be paid to Ms. Maria R. Vitalicio 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 shows that your employee, Ms. Maria R. Vitalicio was certified by her Attending Physician, Dr. Jorge B. Ty to be suffering from coronary insufficiency and atrial fibrillation with moderate ventricular response 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 the pursuant to Section 28(b)(7)(B) of the Tax Code, as amended, any amount received by an official or employee or by her 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. Maria R. Vitalicio will receive from you as a result from 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 the B.P. Blg. 135 and implemented by Revenue Regulations No. 6-82, as amended. cdta It is however, understood that this exemption does not include your payments of Ms. Vitalicio's salary. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue