BIR Ruling [DA-029-00]

January 11, 2000 BIR RULING [DA-029-00] Lepanto Consolidated Mining Co . BA-Lepanto Building 8747 Paseo de Roxas Makati City Attention: Mr . Artemio F . Disini President & Chief Operating Officer Gentlemen : This refers to your letter dated September 13, 1999 requesting for a ruling on the tax consequences relative to the appointment of a second trustee for your Employees' Pension Plan (Fund); and as to whether or not the interest income on money placements, bank deposits and treasury bills earned by said Fund through the second trustee likewise exempt from income tax and consequently from withholding tax. It is represented that the Fund is currently being managed by Far East Bank and Trust company (FEBTC), as trustee; that you wish to appoint Lepanto Investment and Development Corporation (LIDC), as co-trustee, who will hold, invest and manage your future contributions to the Fund to maximize the earnings of the Fund and reduce fees/commission charges; that under your proposal, FEBTC will continue to invest and manage the funds currently held by it and disburse the same, i.e., issue checks to retirees or their beneficiaries in accordance with the Employees' Pension Plan Rules and Regulations; that your company and LIDC will ensure that at no time shall FEBTC, as disbursing agent, be short for cash for this purpose; and that LIDC will not be authorized to disburse any portion of the Fund except for fees and other expenses arising from investment or fund management activities. In reply thereto, please be informed that in BIR Ruling No. 209-91 dated October 18, 1991, this Office ruled that ". . ., I have the honor to inform you that the designation of a single Trustee Bank or a change of trustee or trustees for the purpose of consolidating the administration of the Perpetual Care Fund of MMPC is not taxable, and therefore, all properties both real and personal, monies, shares of stock, etc. in the name of the former Trustee Bank or Trustee Banks and described as such may be transferred to the newly designated Trustee Bank." Based on the foregoing and considering that the appointment of a second Trustee is in no way different from a designation or change of trustee or trustees as in the above-mentioned ruling, it is therefore safe to conclude that the appointment of LIDC, as co-trustee of your Employee's Pension Plan is not taxable. Moreover, since Lepanto Consolidated Mining Company Employees' Retirement Plan is a qualified employees' retirement plan with the purview of Section 32(B)(6)(a) of the Tax Code of 1997, the interest income, which will be realized by the Fund through the appointment of a second trustee, from its investments like money market placements, bank deposits and treasury bills, is likewise exempt from income tax and consequently from withholding tax pursuant to Section 60(B) of the said Code. 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group