Tax Exemption of Separation Benefits to be Paid to Employee Separated from Service by Reason of Health Condition

September 24, 1992 BIR RULING NO. 272-92 28 (b) (7) (B) 209-92 272-92 A.M. Sison, Jr. & Associates 14th Floor, Pacific Bank Building 6776 Ayala Avenue, Makati Metro Manila Attention: Atty . Nelson D . Empalmado Gentlemen : This refers to your request in behalf of your client, ASTRA PHARMACEUTICALS (PHILIPPINES), INC. (ASTRA for brevity) for a ruling that the separation benefits to be paid to their employee, Ms. Carina A. de Leon by reason of health condition are exempt from all taxes pursuant to Section 28 (b) (7) (B) of the Tax Code, as amended. 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 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 Ms. Carina A. de Leon will receive from ASTRA as a result of her separation from the service 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 your client's payment of Ms. Carina de Leon's salary. LLjur Very truly yours, JOSE U. ONG Commissioner of Internal Revenue