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

December 1, 1992 BIR RULING NO. 338-92 28 (b) (7) (B) 275-92 338-92 Itogon-Suyoc Mines, Inc. Room 305 One Corporate Plaza 845 Pasay Road Makati, Metro Manila Attention: Ms . Aurelia G . Floria Division Manager for Finance Admin/Treasurer Gentlemen : This refers to your letter dated June 29, 1992 requesting in effect a ruling that the separation benefits due to your employee, Mr. Felimon S. Likinio, by reason of health condition are exempt from withholding tax. cdta Documents submitted show that your employee, Mr. Felimon S. Likinio, was certified by your company physician, Dr. Manuel M. Acosta, to have been on sick leave since April 20, 1992 for Traumatic Cataract D.D. with Impending Optic Atrophy that led to medical disability due to gradual blurring of the eye; and that due to your employee's health condition your company physician had declared Mr. Felimon S. Likinio to be no longer fit to return to work. 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 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. Felimon S. Likinio 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. Felimon S. Likinio's salary. cdti Very truly yours, VICTOR A. DEOFERIO, JR. Deputy Commissioner (Officer-In-Charge)