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

July 24, 1992 BIR RULING NO. 211-92 28 (b) (7) (B) 052-92 211-92 Globe-Mackay Cable and Radio Corporation 669 United Nations Avenue, Ermita, Manila Attention: Mr . Carlo R . Castelo Vice-President for Personnel Gentlemen : This refers to your request for a ruling that the separation benefits to be paid to Mr. Armando R. Vidal 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, Mr. Armando R. Vidal was certified by his Physician Dr. Leland L. Villadolid to be suffering hypertensive cardiovascular disease, persistent hypertension despite adequate medication; 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 his employer as a consequence of separation of such official or employee from the service of his 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 credits) which Mr. Armando R. Vidal will receive from you as a result of his separation from the service of your company due to his aforesaid health condition is exempt from income tax and consequently, from withholding tax as prescribed under 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. Armando's monthly salary. aisadc Very truly yours, JOSE U. ONG Commissioner of Internal Revenue