Ms. Catherine M. Buenviaje

October 27, 2009 BIR RULING [SB-(047) 675-09] Section 32 (B) (6) (b); SB-014-2007 Ms. Catherine M. Buenviaje B2A, L21 De La Costa Homes Caloocan City Madam : This refers to your letter dated September 01, 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, Ms. Catherine Buenviaje was employed by Bank of the Philippine Islands since November 1995; that she had rendered service for almost 14 years; that she was diagnosed to have breast cancer (stage 4) and was advised to refrain from work due to her current condition; and that she was certified by Dr. Jay F. Alejandre of Quirino Memorial Medical Center that she is no longer fit to work. 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 Ms. Catherine Buenviaje will receive as a result of her separation from the service of her employer including her 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. EcTaSC It is, however, understood that the payment of her 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