Tax Exemption of Separation Benefits Paid by Reason of Health Condition

August 28, 1992 BIR RULING NO. 238-92 28 (b) (7) (B) 209-92 238-92 Dizon Copper-Silver Mines, Inc. Suites 214-215 State Condominium IV Ortigas Ave., Greenhills San Juan, Metro Manila Attention: Mr . Agustin C . Dizon Head, Personnel, Legal and Corporate Secretary Gentlemen : This refers to your request for a ruling that the separation benefits to be paid to Mrs. Presentacion C. Decal 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 showed that your employee, Mrs. Presentacion C. Decal was certified by her attending physician, Dra. Severina Picar-Silverio to be suffering from (a) Hypertension, (b) high blood pressure, (c) chest pains, (d) recurring headaches and dizziness; that further clinical examination confirmed that she is afflicted with ischemic heart ailment and/or acute anginal syndrome; and that said illness affects the performance of her duties and endangers her life if she will continue working. Said findings are 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 her employer as a consequence of separation of such official or employee from the service of her 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 Mrs. Presentacion C. Decal will receive from you as a result of her separation from the service of your company due to her aforesaid health condition is 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. 125 and implemented by Revenue Regulations No. 6-82, as amended. It is however, understood that this exemption does not include your payment of Mrs. Presentacion C. Decal's salary. cdtech Very truly yours, JOSE U. ONG Commissioner of Internal Revenue