Separation Pay -Tax-Exempt

May 14, 1993 BIR RULING NO. 217-93 SEPARATION PAY TAX-EXEMPT 28 (b) (7) (B) 89-92 17-93 L.C. Diaz & Company 3F, Don Jacinto Bldg. De la Rosa corner Salcedo Sts. Legaspi Village, Makati Metro Manila Attention: Atty . Rogelio R . Nacorda Managing Director Tax & Corporate Service Division This refers to your letter dated April 7, 1993, requesting for a ruling to the effect that the separation benefits to be paid to your client, Mr. Moises Y. Siangco, by reason of health condition, be exempt from all taxes pursuant to Section 28(b) (7) (B) of the Tax Code, as amended. cdtech Documents submitted show that Mr. Moises Y. Siangco was certified by the Attending Physician of the Refractories Corporation of the Philippines, Dr. Daniel P.U. Rigor, to be suffering from obstructive jaundice secondary to a recurrent intrahepatic stone, cholangitis, status post chocystectomy and common bile duct exploration and sphineteroplasty, schistosomiasis and liver cirrhosis; and that the company physician, as well as Dr. G. Ypil, his attending physician in the hospital where he was confined, recommended his early retirement for medical reasons. 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 of 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. Moises Y. Siangco will receive from the Refractories Corporation of the Philippines as a result of his separation from the service of the 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 company's payment of Mr. Moises Y. Siangco's salary. VICTOR A. DEOFERIO, JR. Deputy Commissioner of Internal Revenue