Separation Pay - Tax-Exempt

March 31, 1993 BIR RULING NO. 121-93 SEPARATION PAY TAX-EXEMPT 28 (b) (7) (B) 050-93 121-93 Singer Sewing Machine Company 373 Bonifacio Drive Port Area, Manila Attention: Ms . Esperanza V . Alcanices Personnel Manager This refers to your request for a ruling that the separation benefits to be paid to Ms. Amparo B. Aldovino 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, Ms. Amparo B. Aldovino was certified by her attending physician, Dr. Bienvenido Aldanese to be suffering from Intracerebral hematoma (R) fronto-temporo-parietal HPN 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. Amparo B. Aldovino will receive as a result of her 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 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 Ms. Amparo B. Aldovino's salary. aisadc EUFRACIO D. SANTOS Deputy Commissioner of Internal Revenue