Separation Pay - Tax-Exempt

August 26, 1993 BIR RULING NO. 361-93 SEPARATION PAY TAX-EXEMPT 28 (b) (7) (B) 050-93 361-93 A.M. Sison, Jr. & Associates 14th Floor, Pacific Bank Building 6776 Ayala Avenue, Makati Metro Manila Attention: Atty . Nelson D . Empalmado This refers to your request for a ruling that the separation benefits to be paid to Mr. Anselmo M. Moreno, Jr. by Astra Pharmaceuticals (Philippines), Inc. 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 Mr. Anselmo M. Moreno, Jr. was certified by Astra Pharmaceutical (Philippines), Inc. company physician, Dr. Nelson S. Abelardo to be suffering from uncontrollable hypertension, unstable diabetes millitus and myasthenia gravis 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 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. Anselmo M. Moreno, Jr. will receive as a result of his separation from the service of his employer due to the 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 the payments to Mr. Anselmo M. Moreno, Jr.'s salary. cdtech LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue