June 17, 1993

BIR RULING NO. 256-93

SEPARATION PAY-TAX EXEMPT

28 (b) (7) (B) 089-92 256-93

Lepanto Consolidated Mining Company

Lepanto Mine Division
Lepanto, Benguet
Attention: Florendo F . Fajilan
Asst. Personnel Manager

This refers to your request for a ruling that the separation benefits to
be paid to Mr. BERNARDO P. LIPAGO by reason of health condition are
exempt from all taxes pursuant to Section 28(b)(7)(B) of the Tax Code, as
amended. cdtech

Documents exhibited disclosed that your employee, Mr. Bernardo P.

Lipago, was certified by his attending physician, Dr. William K. Campos, to be
suffering from closed fractures of the rib, radius and femur, bilateral and an
open fracture of the upper 3rd of the tibia-fistula right; that application of
plate and screw and insertion of I.M. nail and casting was done and that Mr.
Bernardo P. Libago walked with a limp as the left leg is shorter by 1 ¼ inches
with ankylosis of the left knee joint, as a result of his accident; and that said
illness affects the performance of his duties and endangers his life 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 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 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. Bernardo P. Lipago 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 this exemption does not include your
payment of Mr. Bernardo P. Lipago's salary. cda

CD Technologies Asia, Inc. © 2021 cdasiaonline.com

 LIWAYWAY VINZONS-CHATO
Commissioner of Internal Revenue

CD Technologies Asia, Inc. © 2021 cdasiaonline.com