BIR Ruling [DA-217-04]

April 21, 2004 BIR RULING [DA-217-04] Section 60 (B) AFP Retirement and Separation Benefits System Camp General Emilio Aguinaldo Quezon City Attention: Atty. Francisco M. Paredes Vice-President & Head, Corporate Services Gentlemen : This refers to your letter dated March 9, 2004 requesting, in effect, for a ruling that the sale by AFP Retirement and Separation Benefits System of its shares of stock in Riviera Golf Club, Inc. is exempt from capital gains tax. It is represented that the AFPRSBS is a pension fund of the Armed Forces of the Philippines duly created pursuant to Presidential Decree (P.D.) No. 361, as amended by P.D. No. 1656; that AFPRSBS is established exclusively for the benefit of all active officers and enlisted personnel of the Armed Forces of the Philippines; that all earnings of the AFPRSBS are intended purely for the retirement and separation benefits of these military personnel and no part thereof is diverted for any other purpose other than for the benefit of the latter; that its mission is "to establish a perpetually self-reliant retirement separation benefits system for the AFP retirees and their beneficiaries"; that Section 2 of P.D. No. 361 provides: "Section 2. The System shall be funded as follows: (a) Appropriations and contributions; (b) Donations, gifts, legacies, bequest and others to the System; (c) All earnings of the System which shall not be subject to any tax whatsoever." that AFP Retirement and Separation Benefits System (AFPRSBS) is the developer of the Riviera Golf Club, Inc. (RGCI) situated in Silang, Cavite; that AFPRSBS acquired the shares of stock of RGCI as original incorporator and by way of subscription the System paid these shares with parcels of land together with the development/improvements thereon; that AFPRSBS is selling said shares to individual buyers; and that RGCI shares of stock are at no par value shares; In reply please be informed that this Office still maintains that since AFPRSBS is an employees' trust fund established under P.D. No. 361, as amended by P.D. No. 1656 for the exclusive benefit of all the military members or commission officers and enlisted personnel of the Armed Forces of the Philippines and the corpus or income of the fund is not used for or diverted to purposes other than for the exclusive benefit of the military members or commission officers and enlisted personnel of the AFP and their beneficiaries, the income of the trust fund from its investments remain exempt from income tax and consequently from capital gains tax pursuant to Section 60(B) of the Tax Code of 1997 ( BIR Ruling No. DA-177-2002 dated October 2, 2002 ).Such being the case, the sale by AFP Retirement and Separation Benefits System of its shares of stock in Riviera Golf Club, Inc. to individual buyers is exempt from capital gains tax. 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 as null and void. DCcHAa Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service