BIR Ruling [DA-293-99]

May 17, 1999 BIR RULING [DA-293-99] Fund for Assistance to Private Education (FAPE) 7th Floor Concorde Condominium Cor. Salcedo & Benavides Streets Legaspi Village Makati City Attention: Mr. Adriano A. Arcelo President Gentlemen : This refers to your letter dated June 22, 1998 requesting, in effect, for a ruling on the qualification under Republic Act No. 4917 (now Section 32(B)(6)(a) of the Tax Code of 1997) of the attached draft of a Retirement Plan which you will uniformly apply to employers who desire to comply with Republic Act No. 7641 requiring the payment of retirement benefit to qualified private sector employees within the contemplation of Section 32(B)(6)(a) of the Tax Code of 1997, so that the retirement benefits to be received by the employees under R.A. No. 7641 shall also be exempt from income tax. The attached draft of the Retirement Plan has the following features: (1) The Plan is reasonable, based as it is on the benefit structure of R.A. No. 7641; (2) It extends tax-free benefit only to those who have been in the service of the same employer for at least 10 years and is not less than 50 years of age at the time of retirement; (3) The Plan is a permanent and continuing program, unless sooner terminated by virtue of a valid business reason; (4) The Plan covers all employees and is non-discriminatory, covering all regardless of their position, designation or status and irrespective of the method by which their wages are paid; (5) The Plan is non-contributory; (6) There is impossibility of diversion; (7) In line with R.A. No. 7641, right vest only on retirement dates; and (8) The Fund is administered by a trust. the same qualifies as a reasonable retirement benefit plan within the contemplation of Section 32(B)(6)(a) of the Tax Code of 1997 and as such, it shall be entitled to the following benefits and privileges, viz: (1) The retirement benefits to be received by the member-employees shall be exempt from all taxes (Sec. 32(B)(6)(a), Tax Code of 1997); (2) The income of the Trust Fund from its investments are exempt from income tax (Sec. 60(B), Tax Code of 1997); and (3) The contributions of the company to the retirement fund are deductible from its gross income (Sec. 34(A)(1)(a), Tax Code of 1997). It is understood in this connection, that the Retirement Plan should be submitted to this Office for determination of its qualification under Section 32(B)(6)(a) of the Tax Code of 1997. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)