BIR Ruling [DA-394-05]

September 22, 2005 BIR RULING [DA-394-05] DA 087-02; 60 (B) Ligaya Multi-Employer Retirement Plan No. 41 Stella Marks Street Bo. Kapitolyo, Pasig City Attention: Ms. Belen R. Plaza Treasurer Gentlemen : This refers to you letter dated August 24, 2005 stating that the Ligaya Multi-Employer Retirement Plan (Plan) is a trusted plan duly qualified as a reasonable retirement benefit plan under Section 32(B)(6)(a) of the Tax Code of 1997; that the Plan is the absolute and registered owner of a parcel of land located at Vista Real, Quezon City containing an area of 296 square meters; and that it decided to sell the above mentioned property so that the proceeds will be used for paying overdue retirement benefits. In connection therewith, you now request confirmation of your opinion that the sale of the above-mentioned parcel of land is exempt from the payment of capital gains tax pursuant to Section 60(B) of the Tax Code of 1997. In reply thereto, please be informed that Section 60(B) of the Tax Code of 1997 provides that "Sec. 60(B) Exception. The tax imposed by Title II shall not apply to employees' trust which forms part of a pension, stock bonus, or profit-sharing plan of an employer for the benefit of some or all of his employees (1) if contributions are made to the trust by such employer, or employees, or both for the purpose of distributing to such employees the earnings and principal of the fund accumulated by the trust in accordance with such plan, and (2) if under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees under the trust, for any part of the corpus or income to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of his employees. . ." EcTaSC Considering that the Ligaya Multi-Employer Retirement Plan is an employees' trust fund established under then R.A. No. 4917 for the exclusive benefit of all the employees and the corpus or income of the fund is not used for or diverted to purposes other than for the exclusive benefit of the members and their beneficiaries, this Office holds that the sale of the above-mentioned parcel of land remains exempt from the payment of capital gains tax pursuant to Section 60(B) of the Tax Code of 1997. Accordingly, the income derived by the Fund from the sale of the said property is not subject to income tax and consequently to the 6% capital gains tax. ( BIR Ruling No. DA673-99 dated December 12, 1999 ) 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service