BIR Ruling [DA-321-04]

June 11, 2004 BIR RULING [DA-321-04] Metropolitan Bank & Trust Company Metrobank Plaza Sen. Gil Puyat Avenue Makati City Attention: Atty. Maria Paz Agojo-Garcia Legal Counsel Trust Banking Group Gentlemen : This refers to your letter dated July 28, 2003 stating that Metropolitan Bank and Trust Company (Metrobank), as trustee bank, handles employee benefit trust accounts like Retirement Funds and Provident Funds of its clients; that its duty involves the handling, management and administration of these employee benefit trust funds for which it reports to the Retirement Committee of its client ensuring the proper and efficient management and administration of the same; that part of its duties is the disbursement of separation benefits in favor of the separated employee; that with respect to the employee benefit payments, it receives instruction from the Retirement Committee to disburse an amount in favor of the separated employee (whether retiring, resigning/separated) based on the data which they also provide; that on the basis of the vesting rights under the retirement/provident plan, benefit payments are computed in favor of the employee by the Retirement Committee and based on the aforesaid computation, it prepares the check in favor of the employee concerned. Based on the foregoing representations, you now request confirmation of your opinion that as the trustee bank, it is not your duty to withhold the tax on the benefit payment to be issued to the employee and that this function of withholding can be relegated to the company. In reply thereto, please be informed that Section 5 of Revenue Regulations No. 10-2003 provides as follows: AcaEDC "Sec. 2.57.3. Persons required to deduct and withhold . xxx xxx xxx "All income payments which are required to be subjected to withholding tax shall be subject to the corresponding withholding tax rate to be withheld by the person having control over the payment and who, at the same time, claims the expenses . . . " It is clear from the foregoing that the one in control of the payment of the benefits is Metrobank, since it is the one managing and handling the trust funds of its clients. As such, is therefore duty bound, to withhold the tax on the benefit payments made to the employees of its clients as prescribed in the aforesaid regulations. 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