Narciso M. Balamiento

March 30, 2009 BIR RULING [SB-(019) 240-09] Section 32 (B) (6) (b); SB-014-2007 Narciso M. Balamiento 62 J. Rizal Street Sta. Maria, Bulacan Sir : This refers to your letter dated March 09, 2009 requesting for a ruling that the separation benefits to be paid to you by reason of poor health condition are exempt from income tax pursuant to Section 32 (B) (6) (b) of the Tax Code of 1997, as amended. As represented, Mr. Narciso M. Balamiento was employed by Philippine International Trading Corporation (PITC) as Department Manager of the said corporation; that he was diagnosed to have Cystic Bronchiectasis and was advised to refrain from work due to his current condition; and that the Government Service Insurance System (GSIS) has approved its application for permanent total disability under Republic Act (R.A.) No. 8291. In reply, please be informed that pursuant to Section 32 (B) (6) (b) of the Tax Code of 1997, 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 the said official or employee shall not be included in the 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 which Mr. Narciso M. Balamiento will receive as a result of his separation from the service of his employer including his terminal leave pay (sick leave and vacation leave credits), due to the aforesaid poor health condition are exempt from income tax and consequently from withholding tax prescribed by Section 79, Chapter XIII, Title II of the Tax Code. cAHIST It is, however, understood that the payment of his salary is not exempt from income tax and consequently from withholding tax. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service