Separation Pay - Tax-Exempt

June 4, 1993 BIR RULING NO. 238-93 SEPARATION PAY TAX-EXEMPT 28 (b) (7) (B) 050-93 238-93 Vitarich Corporation 5th Floor, Sarmiento Bldg. 2316 Pasong Tamo Extn. Makati, Metro Manila Attention: Mr . Enrico T . Enriquez AVF-Human Resource Division This refers to your request for a ruling that the separation benefits to be paid by you to Mr. FRANCISCO A. ORTIZ by reason of health condition are exempt from all taxes pursuant to Section 28(b)(7)(B) of the Tax Code, as amended. cdtech Documents submitted show that Mr. Francisco A. Ortiz was certified by your physician, Dr. Teodoro SJ Nieva, to be suffering from CVA, Thrombosis, Essential Hypertension, 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 he will receive as a result of his separation from the service of that 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 the payment of Mr. Ortiz's salary. LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue