BIR Ruling

November 26, 1975 Far Eastern University P. O. Box 609 Manila Attention: Mr . Pascasio S . Banaria Controller S i r : In reply to your request for a ruling on a query pertinent portion of which is hereunder quoted: "For past service benefits earned prior to the establishment of the plan in 1967, the University has been accumulating thru monthly contributions to the fund from which to pay retiring personnel in accordance with the Collective Bargaining Agreements with the Unions. For this purpose, a ten-year fund plan has been set up whereby the Administration contributes to the Retirement Fund of the old personnel a monthly amount calculated to cover the future expected payments of the retirement benefits for the past services. "xxx xxx xxx " Query : May the University deduct from its income for income tax purposes the total contributions to the ten-year plan fund for past service benefits during the taxable year, instead of only the actual payments out of said fund to retirees, beginning with its fiscal year ending April 30, 1975? I have the honor to inform you that pursuant to Section 30(j) of the Tax Code as amplified by Section 118 of the Income Tax Regulations, only one-tenth (1/10) of the contributions by the Far Eastern University to fund past service cost of the contributory Retirement Plan for its employees may be deducted for the taxable year in which the contributions are made and for each of the nine succeeding taxable years. aisa dc Very truly yours, (SGD.) EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."