BIR Ruling [DA-012-00]

January 5, 2000 BIR RULING [DA-012-00] Ms . Maria Eliza J . Arce Sel-Arce Farms, Novaprima Street Novaliches, Quezon City M a d a m : This refers to your request for a ruling as to whether or not the sale of a parcel of land by AFP Retirement and Separation Benefits System (AFPRSBS) is subject to income tax and consequently to creditable withholding tax. It is represented that AFPRSBS is a pension fund duly organized and existing under and by virtue of P.D. 361, as amended by P.D. No. 1656 with principal office address at RIBS Building, 424 Capinpin Avenue, Camp Aguinaldo, Quezon City; that it is an employee's trust and is confirmed to have complied with the requirements of R.A. No. 4917 as a reasonable retirement benefit plan, and as such, is exempt from income tax pursuant to Section 53(b) of the Tax Code, as amended [now Section 60(B) of the Tax Code of 1997]; that AFPRSBS is the absolute and registered owner of a parcel of land located at Bo. Camarin, Caloocan City containing an area of 60.06 square meters and covered by TCT No. 272932 issued by the Registry of Deeds for Caloocan City; and that a Deed of Absolute Sale will be executed by AFPRSBS and Ms. Maria Eliza J. Arce whereby the former will transfer to the latter the above-mentioned parcel of land for and in consideration of P628,056.00. In reply, please be informed that Section 60(B) of the Tax Code of 1997 provides that "the tax imposed by Title II shall not apply to employee's trust which forms part of a pension, stock bonus or profit-sharing plan of an employer for the benefit of some or all of his employees (1) if contributions are made to the trust by such employer, or employees, or both for the purpose of distributing to such employees the earnings and principal of the fund accumulated by the trust in accordance with such plan, and (2) if under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees under the trust, for any part of the corpus or income to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of his employees: Provided, That any amount actually distributed to any employee or distributee shall be taxable to him in the year in which so distributed to the extent that it exceeds the amount contributed by such employee or distributee. LexLib Such being the case, any gains to be derived from the sale of real property owned by AFPRSBS, a qualified pension plan within the contemplation of R.A. No. 4917, is not subject to income tax and consequently to creditable withholding tax prescribed under Revenue Regulations No. 2-98. (BIR Ruling No. 010-90 dated January 31, 1990) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it shall be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group