Separation Benefits - Tax-Exempt

August 26, 1993 BIR RULING NO. 362-93 SEPARATION BENEFITS TAX-EXEMPT 28 (b) (7) (B) 137-92 362-93 Mr. Oscar R. Tolentino c/o Avon Cosmetics, Inc. 2nd Floor, Fortune Building 160 Legaspi St., Legaspi Village Makati, Metro Manila This refers to your request for a ruling that the separation benefits to be paid to you by reason of health condition are exempt from all taxes pursuant to Section 28(b) (7) (B) of the Tax Code, as amended. cdta Documents submitted to this Office show that you have been employed with Avon Cosmetics, Inc. from June 1, 1971 until December 31, 1992 when you had to be separated from the service upon your doctor's advice; that as certified by your doctors, Dra. Leonides R. Lerma and Gregorio Moral, you are suffering from Primary Hypertension and Gouty Arthritis and that your continued service to the company may further endanger your life, notwithstanding your on-going medication and treatment; that upon review of your medical records, the BIR Medical Officer noted that you are suffering from Cervical Spondylosis, Essential Hypertension, conditions which will greatly affect your work performance and which may pose danger to your life. 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 from 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, as amended. 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 you will receive as a result of your separation from the service of the company due to your 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 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 payment of your salary. cdtech LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue