Whether the Separation Benefits to be Paid to Mr. Rfaelito V. Duran by Reason of Health Condition be Exempt from All Taxes

May 27, 1992 BIR RULING NO. 167-92 28 (b) (7) (B) 053-92 167-92 Philippine Airlines 4/F, PAL Building 1 Legaspi St., Legaspi Village, Makati, Metro Manila Attention: Mr . Noel M . Abad Dir . Marketing Support and Services Gentlemen : This refers to your request for a ruling that the separation benefits to be paid to MR. RAFAELITO V. DURAN by reason of health condition be exempt from all taxes pursuant to Section 28(b)(7)(B) of the Tax Code, as amended. cdll Documents submitted show that your employee, Mr. Rafaelito V. Duran was certified by your company's Attending Physician, Dr. Godofredo B. Banzon to be suffering from: 1. Mascular degeneration, both eyes, loss of visual efficiency estimated at 40% for the right and 30% for the left; 2. Mixed type deafness, both ears, loss of hearing estimated at 30% for each ear; 3. Systematic Hypertension, mild on continuous medications; 4 Gouty arthritis, involving knee and ankle joints and Hypertrophic Osteoarthritis, lumbo sacral spines; 5. Diabetes Mellitus, latest fasting blood sugar slight elevated. 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 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, including terminal leave pay, sick leave and vacation leave pays, which Mr. Rafaelito V. Duran will receive from you as a result of his separation from the service of your company due to his 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 payment of Mr. Rafaelito Duran's salary. adc Very truly yours, JOSE U. ONG Commissioner of Internal Revenue