BIR Ruling [DA-252-98]

June 19, 1998 BIR RULING [DA-252-98] Far East Bank and Trust Company Far East Bank Center, Sen. Gil J. Puyat Avenue Makati City Attention: Atty . Redentor M . Buhan Trust Banking Group-Legal Gentlemen : This refers to your letter dated May 26, 1998 stating that the Far East Bank and Trust Company is the trustee of the Bacnotan Consolidated Industries, Inc. (BCII) Retirement Fund (Fund); that the Fund was set up by BCII for the benefit of and subsequent distribution to its employees upon their qualification for retirement; that at present, BCII has seventy-five (75) employees with a total accumulated benefits due them of P54.5 million as of the latest actuarial valuation made in February 1998; and that as of December 31, 1997, however, the market value of the retirement fund was already P158.9 million showing an excess in funding of more than P100 million. In connection therewith, you are requesting confirmation of 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. In reply thereto, please be informed that your opinion to the effect 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. (BIR Ruling No. 102-95 dated July 7, 1995) aisadc Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)