Separation Pay - Tax-Exempt

November 22, 1993 BIR RULING NO. 465-93 SEPARATION PAY TAX-EXEMPT 28 (b) (7) (B) 26-93 465-93 Philippine Airlines Post Office Box 1955 Manila, Philippines Attention: Mr . Lorenzo S . Isidero Manager-Benefits Administration This refers to your request for a ruling that the separation benefits to be paid to Mr. Luxerio Cacdac by reason of health condition are exempt from all taxes pursuant to Section 28(b)(7)(B) of the Tax Code, as amended. cdll Documents submitted show that he was certified by your Medical Director, Dr. Godofredo B. Banzon, to be suffering from Cataract; Moderate Systemic Hypertension; S/P Inferior Wall Myocardial Infarct, and that said illness affects the performance of his duties and endangers his life if he continues working. Said finding is confirmed by the B.I.R. 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 due to death, sickness or other physical disability or for any cause beyond the control of said official or employee 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. Luxerio Cacdac will receive as a result of his separation from the service of that company due to his abovementioned 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. Luxerio Cacdac is subject to the aforesaid income tax. llcd LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue