Separation Pay - Tax-Exempt

September 17, 1993 BIR RULING NO. 376-93 SEPARATION PAY TAX-EXEMPT 28 (b) (7) (B) 76-93 76-93 The Coca-Cola Export Corporation 10th Floor, King's Court Building 2129 Pasong Tamo, Makati Attention: Mr . Cesar T . Dandasan Human Resource Manager This refers to your request for a ruling that the separation benefits to be paid to Mr. Maximo C. Urriza 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 your employee, Mr. Maximo C. Urriza, was certified by your company physician, Dr. Juan Lagunzad to be suffering from Cerebrovascular Accident Thrombosis and that said illness affects the performance of his duties and endangers his life is he 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 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 the 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. Maximo C. Urriza will receive as a result of his separation from the service of your company due to your 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 Mr. Maximo C. Urriza's salary is subject to income tax. LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue