Separation Pay - Tax-Exempt

July 30, 1993 BIR RULING NO. 348-93 SEPARATION PAY TAX-EXEMPT 28 (b) (7) (B) 338-93 348-93 New India Assurance Company, Ltd. 10th Flr., State Centre 333 Juan Luna St. Binondo, Manila Attention: Mr . K . B . S . Ezra Manager of Philippines This refers to your request for a ruling that the separation benefits to be paid to Ms. Elvira M. Romero 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 that your employee, Ms. Elvira M. Romero was certified by your company physician, Dr. Pedro S. de Guzman, M.D., to be suffering from bronchial Asthma caused by severe allergy to smoke, dust, change in temperature/climate and that said illness affects the performance of her duties and endangers her life if she continues working. Said finding is confirmed by the BIR Medical Officer. cdtech 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 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 Ms. Elvira M. Romero will receive from you as a result of her separation from the service of your company due to her aforesaid health condition are exempt from income tax and consequently, from withholding tax as prescribed under Section 72, Chapter 10, Title II of the Tax Code, as amended. It is, however, understood that this exemption does not include your payment to Ms. Elvira M. Romero's salary. LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue