Separation Pay - Tax-Exempt

December 7, 1993 BIR RULING NO. 475-93 SEPARATION PAY TAX-EXEMPT 28 (b) (7) (B) 424-93 475-93 Ms. Marilyn V. Talplacido China Banking Corporation Paseo de Roxas, Makati Metro Manila This refers to your request for a ruling that the separation benefits to be paid to you by China Banking Corporation, 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 you were certified by your attending physician Dr. Hernani C. Garcia, to be suffering from an enlarged heart with occasional chest pain; that said illness affects the performance of your duties and endangers your life if you continue working. Said finding is confirmed by the BIR Medical Officer, Dr. Erwin C. Orteza. 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 you will receive from China Banking Corporation as a result of your separation from the service of said company due to your aforesaid health condition are exempt from income tax consequently, from withholding tax as prescribed under Section 72, Chapter 10, Title II of the Tax Code, as amended. It is however, understood that your salary is subject to income tax. cdti LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue