Separation Pay - Tax-Exempt

June 23, 1993 BIR RULING NO. 269-93 SEPARATION PAY TAX-EXEMPT 28 (b) (7) (B) 1191-92 269-93 Coca-Cola Bottlers Philippines, Inc. Feliza Building, 108 Herrera Street Legaspi Village, Makati Metro Manila Attention: Mr . Mariano A . Limjap Senior Vice-President and Administrative Officer This refers to your request for a ruling that the separation benefits to be paid to Mr. Alberto C. Mansueto III 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. Alberto C. Mansueto III of Cagayan de Oro Plant was certified by your company physician, Dr. Gemi R. Diawatan, to be suffering from diabetes mellitus, ischemic heart disease, hypertensive vascular disease and resolving cerebro vascular accident to pareses of the right upper and lower extremity 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 Mr. Alberto C. Mansueto III will receive as a result of his separation from the service of your company due to the aforesaid health condition are exempt from the 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 his exemption does not include his salary. LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue