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

October 29, 1992 BIR RULING NO. 323-92 28 (b) (7) (B) 209-92 323-92 Coca-Cola Bottlers Philippines, Inc. Grd., 6th & 7th Floors, Penthouse, Ace Bldg. Rada Street Corner de la Rosa Legaspi Village, Makati, Metro Manila Attention: Mr . Mariano J . Limjap Senior Vice-President Administration Director Gentlemen : This refers to your request for a ruling that the separation benefits to be paid to Mr. Francis B. Rosete by reason of health condition are exempt from all taxes pursuant to Section 28(b)(7)(B) of the Tax Code, as amended. cdt Documents submitted show that your employee, Mr. Francis V. Rosete was certified by your company's retainer Physician, Dr. Augusto S. Mina to be suffering from deteriorating personality like insomnia and feeling of insecurity; that the experienced other psychiatric symptoms like difficulty in dealing with others and was diagnosed and treated as having schizophrenia on January 17, 1992 and March 20, 1992; and that said illness affects the performance of his duties and endanger his life if he will continue working. Said findings are 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 employees or by his heirs from his employee 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. LibLex 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. Francis V. Rosete 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 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. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue