BIR Ruling [DA-240-03]

July 25, 2003 BIR RULING [DA-240-03] EEI Corporation No. 3 Calle Economia cor. Industria Sts. Brgy. Bagumbayan Quezon City Attention: Mr. Ferdinand G. Villafuerte SVP & Corporate Secretary Gentlemen : This refers to your letter dated June 6, 2003 stating that EEI Retirement Plan is a duly approved retirement benefit plan under Section 32(B)(6)(a) of the Tax Code of 1997; that pursuant to said plan, the Company reserves the right to amend, suspend or terminate the same if economic conditions so warrant; that due to the severe economic difficulties that the company is presently going through, the company in a meeting of the Board of Directors held on March 14, 2003, has decided to amend the plan by reducing the retirement benefit from 150% to 100% of the retiree's monthly basic salary. Based on the foregoing representations, you now request approval of the aforesaid amendment to the retirement benefit plan of EEI Corporation, to the effect, that the said plan will continue to be tax exempt under Section 32(B)(6)(a) of the Tax Code of 1997. In reply thereto, please be informed that the rights of each employee to the amounts credited to his account are non-forfeitable ( Sec. 2(g), Revenue Regulations No. 1-68, as amended ). Accordingly, the amendment to the EEI Retirement Plan reducing the retirement benefits from 150% to 100% of the retiree's monthly basic salary due allegedly to the economic difficulties that the company is presently going through must not affect the amounts already credited to the account of the employees or their vested rights under the Plan. In other words, the application of the amendment must be prospective without affecting the vested rights of the employees to the benefits under the Plan, otherwise, the said amendment will affect the Plan's qualification under Section 32(B)(6)(a) of the Tax Code of 1997, and therefore, the fund created to implement the provisions of the Plan and the retirement pay to its qualified retirees will be subject to income tax and consequently to the withholding tax. ASHaDT Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service