Separation Pay - Tax-Exempt

December 7, 1993 BIR RULING NO. 478-93 SEPARATION PAY TAX-EXEMPT 28 (b) (7) (B) 342-93 478-93 Lepanto Consolidated Mining Co. BA-Lepanto Bldg., 8747 Paseo de Roxas Makati, Metro Manila Attention: Mr . Catalino Macaraig, Jr . Senior Vice-President This refers to your request for a ruling that the separation benefits to be paid to your following employees based at your Mine Division in Mankayan, Benguet, by reason of health condition are exempt from all taxes pursuant to Section 28(b) (7) (B) of the Tax Code, as amended: cdt 1. Mr. Modero Pawig 17. Mr. Alloy A. Gammong 2. Mr. Pablo M. Mosawan 18. Mr. Aguinaldo A. Leon, Sr. 3. Mr. Jose S. Tadawan 19. Mr. Arthur M. Sabado, Sr. 4. Mr. Pongdad Segnaben 20. Mr. Blacio L. Balacay 5. Mr. Polito P. Domyong 21. Mr. Arnold A. Bistoyong 6. Mr. Jesus H. Subido 22. Mr. Eduardo G. Limayog 7. Mr. Daniel O. Guarin 23. Mr. Alfredo F. Valmonte 8. Mr. Delfin K. Carias 24. Mr. Moises L. Fagsao 9. Mr. Patrick F. Tado 25. Leon N. Fatongkeg, Sr. 10. Mr. Gilbert G. Felipe 26. Mr. Alimbas A. Paplonot 11. Mr. Jaime B. Genetiano, Jr. 27. Mr. Gabriel D. Pacio 12. Mr. Felipe B. Cacamo 28. Mr. Herminigildo S. Flores 13. Mr. Luis D. Kimpay, Jr. 29. Mr. Leon P. Datol, Sr. 14. Mr. Rodulfo P. Jacinto 30. Mr. Fortunato P. Bales 15. Mr. Herman M. Fossar 31. Mr. Rogelio O. Montemayor 16. Mr. Nicholas S. Focasan 32. Mr. Victor O. Ligos Documents submitted disclosed that your aforenamed employees were certified by your company physician, Dr. William K. Campos, to be suffering from various ailments which affect the performance of their duties and endanger their lives if they continue working. Said finding was confirmed by the BIR Medical Officer except for your following employee who were found to be suffering from uncomplicated PTB which if given adequate, religious treatment for 6-12 months, and adequate nutrition and rest will eventually heal; and therefore not qualified for exemption: 1. Mr. Moldero Pawig . Mr. Pablo M. Mosawan 3. Mr. Jose S. Tadawan 4. Mr. Pongdad Segnaben 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 your aforesaid employees, except for Messrs. Moldero Pawig, Pablo S. Mosawan, Jose S. Tadawan and Pongdad Segnaben, whose disabilities are in the opinion of the BIR Medical Officer to be partial temporary, will receive from you as a result of their separation from the service of your company due to their aforesaid health conditions are exempt from income tax and consequently from withholding tax as prescribed under 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 your payments to your aforenamed qualified employees of their salaries are subject to income tax. LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue