BIR Ruling

August 25, 1976 Far East Bank and Trust Company Muralla, Intramuros Manila Attention: Atty . Reynaldo G . Geronimo Senior Manager Gentlemen : In reply to your request for determination of the qualification under Republic Act No. 4917 of the USI Asia Pacific, Inc. Employees' Retirement Plan, I have the honor to inform you that a close perusal of the written program constituting the Plan, Trust Indenture and Statement of Actuarial Assumptions or Valuations which were submitted by you for this purpose, disclosed the following: cdi 1. It is a definite written program; 2. It is more or less permanent in character; 3. It covers all permanent and regular employees of the company; 4. It is non-discriminatory; 5. It is duly funded and trusteed; 6. The funding is actuarially sound; and 7. Finally, it provides that no part of the corpus or income of the Trust Fund shall be used for or diverted to purposes other than for the exclusive benefit of the member-employees and their beneficiaries. Having met the requirements of the law and the regulations, the USI Asia Pacific, Inc. Employees' Retirement Plan qualifies as a reasonable retirement benefit plan within the contemplation of Republic Act No. 4917, and as such, it shall be entitled to all the benefits and privileges provided for by said Act, as follows: 1. The retirement benefits to be received by the member-employees shall be exempt from all taxes; 2. The income of the Trust Fund from its investments are exempt from income tax; and 3. The contributions of USI Asia Pacific, Inc. to the retirement fund are deductible from its gross income. It may be stated in this connection, however, that the employee-member who retires "upon reaching the age 65" or "upon reaching the age of 60 (Secs. 1 & 2(a), Art. VII, Plan Rules) must have rendered at least ten (10) years of faithful and continuous service to the Company; and the retirement benefits to be received by the employee-members who avails of the optional retirement "upon the completion of fifteen (15) years are more of continuous service and upon reaching the age of forty (40) years" shall be subject to income tax because Republic Act No. 4917 provides as a condition precedent to exemption of the employee benefits under the Plan, that the employee must, among others, be in the service of the same private firm for at least 10 years and must be at least 50 years old at the time of retirement. (see Sec. 2(b), Art. VII, Plan Rules) The company's contributions to the fund to cover past service liability should be apportioned in equal parts over a period of ten consecutive years beginning with the year in which the transfer of payment is made pursuant to Section 30(j) of the Tax Code as amplified by Section 118 of the Income Tax Regulations. It is of course understood that the Plan shall continue to qualify thru all the years that it shall be in operation and that all forfeitures arising under the operation of the Plan shall be applied to reduce employer contribution. Finally, any modification or amendment that shall hereafter be made to the Plan should be submitted to this Office for certification that any such amendment or modification does not affect the qualification of the Plan. Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."