Separation Benefits - Tax-Exempt

August 17, 1993 BIR RULING NO. 356-93 SEPARATION BENEFITS TAX-EXEMPT 28 (b) (7) (B) 276-93 356-93 Ms. Anita B. Bonganay 28 Lourdes Street Pasay City This refers to your request for exemption from the withholding tax on the separation benefits to be paid to you by your employer, the Philippine Long Distance Telephone Company, by reason of health condition pursuant to Section 28(b) (7) (B) of the Tax Code, as amended. cdta Documents submitted show that you were certified by your physician, Dr. Guillermo R. Damian, to be suffering from Scoliosis with law back pain, and that said illness affects the performance of your duties as an operator and endangers your life if you continue 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 the employer due to death, sickness or other physical disability or for any cause beyond the control of 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, it is the opinion of this Office as it hereby holds that any and all amounts including your terminal leave (sick leave and vacation leave credits) pay which you will receive as a result of your separation from the service of your employer, the Philippine Long Distance Telephone Company due to your aforesaid condition, are exempt from income tax and consequently from the 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 payment of your salary. LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue