Separation Pay - Tax-Exempt

December 16, 1993 BIR RULING NO. 487-93 SEPARATION PAY TAX-EXEMPT 28 (b) (7) (B) 220-93 487-93 Petron Corporation 7901 Makati Avenue Makati, Metro Manila Attention: Mr . Apolinario G . Reyes, Jr . Vice-President & General Manager This refers to your request for a ruling that the separation benefits to be paid by your company to MR. PEREGRINO Q. DEPANO, 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 to this Office disclosed that your said employee, Mr. Peregrino Q. Depano, was certified by your company physician, Dr. Jose S. Ocampo IV, to be suffering from periodic dizziness, nape pain and headache due to hypertension; and that his health condition is no longer compatible with his present work assignment as technician in the Oil Movement and Storage Section, where he is required to work in elevated structure and may pose a risk to his life and his fellow workers 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 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 Mr. Peregrino Q. Depano will receive from you as a result of his separation from the service of your company due to his aforesaid health condition 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 the salary to be paid or paid by Petron Corporation to Mr. Peregrino Q. Depano shall be subject to income tax. prll LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue