Bank of Commerce

January 17, 2008 BIR RULING [DA-020-08] DA487-05 Bank of Commerce 6764 Ayala Avenue Makati City Attention: Ms. Lydia E. Virtusio Assistant Vice President and Ms. Gertrude D. Agbay Senior Manager Gentlemen : This refers to your letter dated October 10, 2007 stating that the CAP College Foundation, Inc. Retirement Plan has been apprised by the Actuary or E.M. Zalamea Actuarial Services, Inc.; that there exists an excess or over-funding in the fair value of the retirement plan assets such that the Company's liability for retirement benefits under the provisions of the Plan is covered by more than the funds needed to fully satisfy the same; that it is consistent with the company's best commercial interest that the excess fund in the retirement plan assets be reverted back to the Company for use in the furtherance of and in connection with the conduct of its business; that in a Board Resolution dated September 14, 2007, the Company is thereby empowered to cause the reversion to it of and to recover the entire amount of the excess fund present and existing in the total value of the retirement plan assets of the corporation; and that it was further resolved that the Company shall carry out the necessary steps and courses of action required by applicable laws, rules and regulations as enforced by the appropriate government authority in undertaking to recover and cause the reversion to the Company of the excess fund of the retirement plan assets. AIaSTE In connection therewith, you now request confirmation of your opinion that the portion of the Retirement Fund of CAP College Foundation, Inc. in excess of the amount actuarially determined to cover the benefits of all the employees, may be reverted back to the said Company without terminating the fund and that such excess amount shall be declared as income of the said Company. In reply thereto, please be informed that this Office had already occasioned to rule on the matter when it said in BIR Ruling No. DA252-98 dated June 19, 1998 and later reiterated in BIR Ruling No. DA113-05 dated April 5, 2005 , that ". . . Your opinion that the portion of the fund in excess of the amount actuarially determined to cover the benefits of all the employees amounting to more than P100 million may be reverted to BCII without terminating the fund is hereby confirmed. However, BCII should declare as income the said excess of P100 million and pay the corresponding income tax thereon pursuant to Section 27 (A) of the Tax Code of 1997." HEISca Accordingly, inasmuch as the above-cited rulings are in all fours similar to the instant case, this Office hereby confirms your opinion that the portion of the fund in excess of the amount actuarially determined to cover the benefits of all the employees in the approximate amount of P5,000,000.00 may be reverted to CAP College Foundation, Inc. without terminating the fund. However, CAP College Foundation, Inc. should declare as income the said excess amount and pay the corresponding income tax thereon as prescribed in Section 27 (A) of the Tax Code of 1997, as amended. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. IECAaD Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service