Separation Pay - Tax-Exempt

September 28, 1993 BIR RULING NO. 382-93 SEPARATION PAY TAX-EXEMPT 28 (b) (7) B)-276-93-382-93 Adamson University Manila Attention: Fr . Constancio Gan, C . M . University Treasurer This refers to your request for a ruling that the separation benefits to be paid to MRS. PURISIMA A. CORONADO by reason of health condition are exempt from all taxes pursuant to Section 28(b) (7) (B) of the Tax Code, as amended. cdtech Documents submitted disclosed that your employee, MRS. PURISIMA A. CORONADO met a vehicular accident as evidenced in the attached hospital record and attested by the attending physician of Manila Doctor's Hospital. Since then she has suffered intermittent pains in her left foot and she could no longer prolong the eight hour classroom management daily from Monday to Saturday; that she was diagnosed to be suffering from diabetic retinopathy and diabetes mellitus and 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. 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 MRS. PURISIMA A. CORONADO 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 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 your payment of MRS. PURISIMA A. CORONADO's salary. cdta LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue