Tax Exemption of the Separation Benefits Received by Employee Separated from Service by Reason of Health Condition

July 16, 1992 BIR RULING NO. 206-92 28 (b) (7) (B) 191-92 206-92 Mr. Romulo A. Amoyo Villa Raymundo Palatiw, Pasig Metro Manila S i r : This refers to your request for a ruling that the separation benefits to be paid to you by your former employer, Medical City General Hospital by reason of health condition be exempt from all taxes pursuant to Section 28 (b) (7) (B) of the Tax Code, as amended. cdt Documents submitted show that you were certified by your Attending Physician, Dr. Mario Melendres to be suffering from Permanent Nerve Damage on the Right Upper Extremity and that said illness affects the performance of your duties and endangers your life if you continue 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 you will receive as a result of your separation from the service of your company due to the 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 salary. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue