Separation Benefits - Tax-Exempt

June 18, 1993 BIR RULING NO. 265-93 SEPARATION BENEFITS TAX-EXEMPT 28 (b) (7) (B) 196-93 265-93 Rhone-Poulenca Agrochemicals Philippines, Inc. J.P. Rizal, Bo. Namayan, Mandaluyong Metro Manila Attention: Ms . Nora F . Abellar Manager, Employee Relations & Administrations This refers to your request for a ruling that the separation benefits to be paid to MR. ERNESTO R. SILVA 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. Ernesto R. Silva was diagnosed by a noted cardiologist at Our Lady Of Lourdes Hospital, Dr. Victor Buencamino on November 16, 1992, to be suffering from Ischemic heart disease with an old anteroseptal infract and astero-lateral wall ischemia causing recurrent angina Pectoris. He was recommended for Coronary Angiography to determine how many coronary vessels are blocked and he is at great risk of another coronary attack hence forced to retire to reduce the risk and certified by your company Physician, Dr. Albert L. Asprec, 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. cdtech 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. Ernesto R. Silva 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. Ernesto R. Silva's salary. cd LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue