Resins Incorporated Retirement Plan

October 18, 2007 BIR RULING [DA-542-07] 32 (B) (6) (a); 60 (B); DA-345-2000; DA-342-2006; DA-506-2006; DA-557-2006 Resins Incorporated Retirement Plan c/o Resins Inc. Compound, E. Rodriguez Jr. Avenue Pasig City Attention: Mr. Rafael Ma. C. Romualdez Corporate Secretary Gentlemen : This refers to your undated letter requesting for a ruling that the sale of real properties belonging to Resins Incorporated Retirement Plan registered in the name of Commercial Bank and Trust Company of the Philippines, as the Investment Manager/Trustee Bank, is not subject to capital gains or creditable withholding taxes. EHSTDA Background Resins Incorporated Retirement Plan ("Resins Retirement Plan") is a trust plan duly organized and existing under and by virtue of the laws of the Philippines. It was organized primarily to provide for the retirement benefits to all bona fide employees of Resins, Inc. Moreover, said Retirement Plan is qualified to all the tax exemptions under Republic Act 4917, as confirmed by then BIR Commissioner Misael P. Vera, in a ruling dated September 12, 1974. Sometime in 1974, Resins, Inc. engaged the services of Commercial Bank and Trust Company of the Philippines ("CBTC"), a commercial banking institution organized and existing under Philippine laws, as the Investment Manager of Resins Retirement Plan. Then in 1977, during its incumbency as Investment Manager of the Plan, CBTC acquired eighteen (18) parcels of land for and in behalf of Resins Retirement Plan, and all the corresponding Transfer Certificates of Title covering said real estate were registered in the name of Commercial Bank and Trust Company, being the Investment Manager of Resins Retirement Plan. The CBTC ceased to be the Investment Manager of the Plan when it was acquired by the Bank of the Philippines Islands in the year 1980. Henceforth, a duly appointed Board of Trustees assumed the functions, duties and responsibilities of Investment Manager of the Resins Retirement Plan. On March 12, 2004, Resins Retirement Plan, through the Chairman of its Board of Trustees, has entered into an Agreement to Purchase and Sell with Crown Asia Properties (North), Incorporated, involving nineteen (19) parcels of land, which included the eighteen (18) lots mentioned above, covered by Transfer Certificate of Title Nos. N-16401, N-16400, N-16399, N-16398, N-16397, N-16396, N-16395, N-16394, N-16393, N-16392, N-16391, N-16390, N-16389, N-16388, N-16387, N-16386, N-16385,336090. ECaSIT Subsequently, A Deed of Absolute Sale was executed by the parties after both have fully complied with the conditions set forth in the Agreement to Purchase and Sell. In reply thereto, please be informed that one of the benefits and/or privileges that a qualified employees' retirement plan is entitled, within the purview of Section 32 (B) (6) (a) of the Tax Code of 1997, as amended, is the exemption from income tax of the income of the trust fund from its investments. (Section 60 (B) of the Tax Code of 1997) In relation thereto, Section 60 (B) of the Tax Code of 1997 provides that the tax imposed by Title II shall not apply to employee's 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: Provided, That any amount actually distributed to any employee or distributee shall be taxable to him in the year in which so distributed to the extent that it exceeds the amount contributed by such employee or distributee. Such being the case, and since Resins Incorporated Retirement Plan is a qualified employees retirement plan within the purview of Section 32 (B) (6) (a) of the Tax Code of 1997, as amended, the capital gains, if any, which will be realized by it from the sale of the aforementioned parcels of land shall be exempt from the payment of capital gains tax imposed under Section 24 (D) of the Tax Code of 1997 nor to the creditable withholding tax prescribed under Revenue Regulations (RR) No. 2-98, as last amended by RR 30-2003. (BIR Ruling Nos. 368-88 dated August 3, 1988, 010-90 dated January 31, 1990, DA-342-2006 dated June 1, 2006) IcHTED This will therefore serve as an authority for the RDO concerned to issue the corresponding Certificate Authorizing Registration (CAR) so that titles to the said properties may now be issued in the name of the buyer. 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. SEHaDI Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service