Separation Pay - Tax-Exempt

October 14, 1993 BIR RULING NO. 403-93 SEPARATION PAY TAX-EXEMPT 28 (b) (7) (B) 126-93 403-93 Coca-Cola Bottlers PHILIPPINES, INC. 108 Herrera Street, Legaspi Village Makati, Metro Manila Attention : Mr . Mariano A . Limjap Senior Vice-President Administration Director This refers to your request for a ruling that the separation benefits to be paid by you to MR. JOSUE GONZALES 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 he was certified by your physician, Dr. Pablo S. Santos to be suffering from Complex Partial Seizure, Late Onset with a Psychological Component, 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 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 including his terminal leave pay (sick leave and vacation leave credits) which Mr. Josue Gonzales will receive as a result of his separation from the service of that company due to his 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 the salary paid by your company to Mr. Josue Gonzales is subject to the aforesaid withholding tax. cdtech LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue