Bank of the Philippine Islands

March 5, 2009 BIR RULING [DA-(C-033) 139-09] Sec. 60 (B); DA-588-2006 Bank of the Philippine Islands Asset Management & Trust Group BPI Building, Ayala Avenue cor. Paseo de Roxas St. Makati City Attention: Ma. Leonora V. Mendoza Gentlemen : This refers to your letter dated January 05, 2009 requesting for confirmation of your opinion on the exemption of the BPI RTF from the payment of capital gains tax and creditable withholding tax. CacHES It appears that the BPI Group of Companies Retirement Fund (BPI RTF) had sold the following properties situated in the Barrio of Pututan, Muntinlupa, Metro Manila with a total amount of P21,800,000.00, viz. : Lot 13, Block 12 Lot 3, Block 12 Lot 7, Block 5 In reply, please be informed that pursuant to Section 60 (B) of the Tax Code of 1997, pertinent portion of which reads: xxx xxx xxx "Sec. 60 (B). Exception . The tax imposed by this Title 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 distribute 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 distribute." xxx xxx xxx exemption from income tax of the BIR-qualified employee's trust fund applies to all income or earnings of any kind of property held by it in trust. ( Commissioner of Internal Revenue vs. The Hon. Court of Appeals, the CTA, GCL Retirement Benefit Plan, G.R. No. 95022, prom. March 23, 1992). It shall include interest income from bank deposits and yield from deposit substitute as well as gains realized from dealings in real property held as capital asset. Provided, that in the case of the latter, the entire proceeds of the sale shall form part of the retirement fund for the benefit of the member-employees/beneficiaries. In view thereof, this Office hereby confirms your opinion that the above-described transaction involving the sale of the fund's capital assets wherein the entire proceeds of the sale are earmarked for the duly approved retirement plan established by the employer for the benefit of its employees shall be exempt from capital gains tax and consequently from the creditable expanded withholding tax prescribed under Revenue Regulations No. 2-98, as amended. TaDSHC 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, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service