BIR Ruling [DA-199-02]

November 11, 2002 BIR RULING [DA-199-02] Civil Service Commission Constitution Hills, Batasang Pambansa Complex Diliman, Quezon City Attention: Ms. Lydia A. Castillo Director IV-OFAMS Gentlemen : This refers to your undated letter requesting a ruling to the effect that the yield from the investment of the trust fund of the Civil Service Commission-Welfare Fund, specifically from the purchase of government securities thru the Bureau of Treasury's (BTR) over-the-counter (OTC) window for tax exempt institutions (TEIs) is exempt from the 20% final tax. IcaHTA It appears that the Civil Service Commission-Welfare Fund is a welfare fund consists of contributions made by both the Commission and its officials and employees to provide welfare benefits to the members or their heirs under such terms and conditions as may be fixed by its governing board; that the contributions of the members are utilized to extend guaranteed loans while expenses for medical and hospitalization assistance, tuition fees of scholars and burial assistance are charged against the income from operations; and that any surplus from income at the end of fiscal year are credited to the total equity of the members which they may refund only upon retirement, resignation or separation from the service. In reply thereto, please be informed that under Section 60(B) of the Tax Code of 1997, the income of an employees trust are exempt from income tax. Such being the case, this Office is of the opinion and so holds that the yield from investment of the trust fund of the Civil Service Commission-Welfare Fund which is an employee's trust in government securities are exempt from the 20% final tax under Section 24(B)(1) of the Tax Code of 1997. Moreover, the trust fund is also exempt from the 20% final tax on interest and/or yield on deposit substitute instruments land on interest on its Philippine currency bank deposits. ( CIR vs. GCL Retirement Plan , G.R. No. 95022 dated March 23, 1992 ) 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, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service