BIR Ruling [DA-397-06]

June 26, 2006 BIR RULING [DA-397-06] DA 087-02; 60 (B) Bank of the Philippine Islands Asset Management & Trust Group BPI Building, Ayala Avenue corner Paseo de Roxas Makati City Attention: Mr. Manuel F. Quiambao, Jr. Gentlemen : This refers to your letter dated January 24, 2006 stating that your client, Philippine Investment Management Consultants (PHINMA), Inc. Retirement Fund, is a qualified reasonable retirement benefit plan; that the Fund is the owner of 420,383 shares of stock in Bacnotan Consolidated Industries, Inc.; and that the Fund with BPI Trust Account: No. 10330052 desires to sell its 420,383 shares of stock in Bacnotan Consolidated Industries, Inc. to Trans-Asia Oil and Energy Corporation by virtue of a Deed of Sale of Shares of Stock in the amount of P4,203,830.00. In connection therewith, you now request confirmation of your opinion that the sale of the 420,383 shares of stock in Bacnotan Consolidated Industries, Inc. by the Fund in favor of Trans-Asia Oil and Energy Corporation is not subject to the 5%-10% capital gains tax imposed under Section 27(D)(2) 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. . ." Considering that the PHINMA Retirement Fund 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 its investments remain exempt from income tax and consequently from withholding tax pursuant to Section 60(B) of the Tax Code of 1997. Accordingly, the gain derived by the Fund from the sale of its 420,383 shares of stock in Bacnotan Consolidated Industries, Inc. is not subject to the capital gains tax imposed under Section 27(D)(2) of the Tax Code of 1997. (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