BIR Ruling [DA-490-98]

November 16, 1998 BIR RULING [DA-490-98] Philippine Amusement & Gaming Corporation Pagcor House, 1330 Roxas Blvd. Ermita, Metro Manila Attention: Ms . Amparito G . Bernas Administrator Provident Fund Management Department Gentlemen : This refers to your letters dated September 24 and October 26, 1998 requesting tax exemption of the PAGCOR Provident Fund. In support of your letter-request, you submitted the following documents: 1. a copy of the Retirement Plan Information Sheet; 2. a copy of the Provident Fund Rules and Regulations; and 3. a copy of the Trust Agreement After a careful review of the aforementioned documents, it was disclosed that the PAGCOR Provident Fund: 1. is a definite written program; 2. is more or less permanent in character; 3. covers all regular employees of the company; 4. is non-discriminatory; 5. is duly funded and trusteed; and 6. provides that no part of the corpus or income of the Trust Fund shall be used for or diverted to purposes other than for the exclusive benefit of the member-employees and their beneficiaries. In view thereof, this Office is of the opinion as it hereby holds that the PAGCOR Provident Fund is an employees' trust exempt from income tax under Section 60(B) of the Tax Code of 1997, and therefore, the income of the Trust Fund from its investments are exempt from income tax. casia Moreover, the income or earnings from investments of the Fund, e.g., dividends, are taxable to the employee-member to the extent of the entire amount thereof, in the year so distributed, if the distribution is effected before his retirement from the corporation and that the income distributed shall not be diminished by the employee's personal contribution. Likewise, if the employee receives the PAGCOR counterpart contributions plus earnings thereon before retirement, the entire amount is taxable to him in the year so distributed. Pursuant to Section 32 (B) (6) (f) of the Tax Code of 1997, the benefits to be received from the PAGCOR Provident Fund by the employee-members upon retirement in addition to and as part of their retirement gratuity from PAGCOR shall be exempt from income tax. This means that, upon retirement, the total benefits which the employee shall receive consisting of his personal contributions, the PAGCOR counterpart contributions and the income of the Fund to which the employee is entitled and is distributed to him shall be exempt from income tax. Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group