BIR Ruling

June 23, 1972 Joaquin Cunanan & Co. 1564 A. Mabini, Ermita Manila Gentlemen : This refers to your request for exemption of the Franklin Baker Company of the Philippines Retirement Savings Plan from the payment of income tax and filing of income tax returns under Section 56(b) of the Tax Code. Investigation disclosed that the Franklin Baker Company of the Philippines Retirement Trust Fund is an employee' trust which forms part of the employer-company's pension plan otherwise known as the Franklin Baker Company of the Philippines Retirement Savings Plan which was created and organized for the purpose of extending disability, death, separation and retirement benefits to the regular employees of Franklin Baker Company of the Philippines, a domestic corporation with principal place of business in San Pablo City, that the Franklin Baker Company Trust Fund is duly trusteed and consists of the employees' and the corporation's contributions of 3% and 5%, respectively, of the employee's salaries or wages plus the earnings and income of the Fund from investments less expenses of its operation; that when a member-employee dies, retires or is separated from the service of the employer company, the amount credited to his account under the Fund is paid to him in lump sum; and that under the Trust Agreement and the rules of the plan, it is impossible at any time prior to the satisfaction of all liabilities with respect to the employees under the trust for any part of the corpus or income to be used for or diverted to, purposes other than for the exclusive benefit of the member-employees and their beneficiaries. cdti In view of all the foregoing, this Office is of the opinion as it hereby holds that the Franklin Baker Company of the Philippines Retirement Savings Plan is exempt from the payment of income tax under Section 56(b) of the Tax Code and, therefore, need not file an income tax return. The contributions made by the corporation to the Trust Fund are deductible from its gross income in accordance with Section 30(j) of the Tax Code as amplified by Section 118 of the Income Tax Regulations; the income of the Trust Fund from its investments are exempt from income tax; and any and all amounts which shall be distributed to and received by any employee-member from the Trust Fund over and above his contributions to the said Fund shall be taxable to him in the year in which so distributed and received. The Franklin Baker Company of the Philippines Retirement Savings Plan as well as its retiring employee-members may, however, avail of the tax-exemption benefits and privileges under Republic Act No. 4917 which took effect on June 17, 1967 after the said Plan shall have been found to be reasonable in accordance with the requirements of the Act as amplified by Revenue Regulations No. 1-68. For this purpose, the employer-corporation, Franklin Baker Company of the Philippines must submit to this Office, B.I.R Form No. 17.60 duly filled out and accompanied by a written program constituting the Plan and the Trust Instrument. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue