Separation Pay - Tax-Exempt

July 9, 1993 BIR RULING NO. 319-93 SEPARATION PAY TAX-EXEMPT 28 (b) (7) (B) 239-93 319-93 Del Monte Philippines, Inc. Citibank Center 8741 Paseo de Roxas Makati, Metro Manila Attention: Mr . Danilo A . Soriano Legal Officer This refers to your request for a ruling that the separation benefits to be paid to Mr. TORIANO DELA PEA 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. Toriano dela Pea, field laborer at your Bukidnon plantation, was certified by your company's attending physician, Dr. Andrew N. Ong, to be suffering from complete fracture of the right neck of the humerus (arm) with posterior dislocation; that he is unable to abduct and rotate internally and externally his affected shoulder 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 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. Toriano dela Pea will receive from you as a result of his separation from the service of your 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 and implemented by Revenue Regulations No. 6-82, as amended. It is however, understood that this exemption does not include your payment of Mr. Toriano dela Pea's salary. casia LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue