BIR Ruling

June 29, 1976 Feliciano F. Miravite, Inc. Suites 305-309 Sarmiento Bldg. Ayala Avenue, Makati, Rizal Attention: Mr . Feliciano F . Miravite President and Actuary Gentlemen : This refers to the Precision Convex Manufacturing Co., Inc. Retirement Plan which you submitted to this Office for determination of qualification under Republic Act No. 4917. cdi A close perusal of the Plan, the Trust Agreement and the Actuarial Certification disclosed the following: 1. It is a definite written program; 2. It is more or less permanent in character; 3. It covers all regular employees of the company; 4. It is non-discriminatory; 5. It is duly funded and trusteed; 6. 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 regulations, the Precision Convex Manufacturing Co., Inc. 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 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 the Precision Convex Manufacturing Co., Inc. to the retirement fund are deductible from its gross income. It is observed, however, that the Plan provides for retirement at age 60 or after completing 25 years of continuous service. (See No. 1(a) and (b), Art. V, Plan) This provision of the Plan allows (1) the retirement of an employee who may have served the company for even less than ten (10) years as long as he retires at age 60; and (2) the retirement of an employee who may be less than fifty (50) years of age at the time of retirement provided he has rendered (25) years of service. In such cases, the benefits payable to the retiring employees shall not be exempt from 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. Any and all amounts to be received under the Plan by a member-employee voluntarily resigning or separated from the service of the employer-company over and above his own contributions shall be subject to income tax. (See Section 2(a), Art. V, Plan) 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 or 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 through 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's contributions. 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. aisa dc Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3