Separation Pay - Tax-Exempt

July 8, 1993 BIR RULING NO. 298-93 SEPARATION PAY TAX-EXEMPT 28 (b) (7) (B) 22-93 98-93 L.C. Diaz & Company 3/F Don Jacinto Building Dela Rosa cor. Salcedo Sts. Legaspi Village, Makati Metro Manila Attention: Atty . Rogelio S . Nacorda Managing Director This refers to your request for a ruling to the effect that the separation benefits to be paid to Mr. RENATO MEJICO of Refractories Corporation of the Philippines 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 Mr. Renato Mejico was certified by his company's attending physician, Dr. Daniel P.U. Rigor, M.D., to be suffering from "Retinitis Pigmentose" a genetic disease which causes gradual pigmentation and opacity of the retina; 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 his employer as a consequence of separation of said 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 the 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. Renato Mejico will receive from Refractories Corporation of the Philippines as a result of his separation from the service of the company due to his 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, 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 company's payment of Mr. Renato Mejico's salary. LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue