Separation Pay - Tax-Exempt

May 5, 1993 BIR RULING NO. 196-93 SEPARATION PAY TAX-EXEMPT 28 (b) (7) (B) 134-93 196-93 The Medical City General Hospital San Miguel Ave. cor. Lourdes St. Ortigas Office Complex Mandaluyong, Metro Manila Attention: Marianne B . Francisco Personnel Manager This refers to your request for a ruling that the separation benefits to be paid to Mr. QUIRINO N. GONDRA 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 show that your employee, Mr. Quirino N. Gondra, diagnosed by Dr. Mario Melendes of Medical City General Hospital, to be suffering from Hypertensive Cardiovascular disease, Reversible Ischemic Neurologic Deficit, V/S Thrombotic Stroke (L) on June 1, 1986; Hypertriglyceridema (Hyperlipidemia) on July 1, 1989 and Ureterolithiasis left on February 10, 1989, 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 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 Mr. Quirino N. Gondra 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 as prescribed under Section 78, 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. Quirino N. Gondra's salary. aisadc VICTOR A. DEOFERIO, JR. Deputy Commissioner of Internal Revenue