Separation Pay - Tax-Exempt

November 25, 1993 BIR RULING NO. 467-93 SEPARATION PAY TAX-EXEMPT 28 (b) (7) (B) 126-93 467-93 Coca-Cola Bottlers Philippines, Inc. 108 Herrera Street, Legaspi Village Makati, Metro Manila Attention: Mr . Mariano A . Limjap Senior Vice-President & Administration Officer This refers to your request for a ruling that the separation benefits to be paid by you to MR. RAMON DE MESA 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 show that he was certified by your physician, Dr. Rudy R. Padua to be suffering from Lumbosacral Spondylisthesis 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 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 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. Ramon de Mesa 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. Ramon de Mesa is subject to the aforesaid withholding tax. cdti LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue