AFP Retirement and Separation Benefits System

March 31, 2009 BIR RULING [DA-(C-045) 177-09] Sec. 60 (B); DA(C-139)449-2008 AFP Retirement and Separation Benefits System Camp General Emilio Aguinaldo Quezon City Attention: Atty. Rolando G. Borja Legal Department Gentlemen : This refers to your letter dated February 18, 2009, wherein you requested for a confirmatory ruling that AFP RETIREMENT AND SEPARATION BENEFITS SYSTEM (AFP-RSBS) is not subject to capital gains tax and/or creditable withholding tax pursuant to Section 60 (B) of the Tax Code of 1997. ICAcHE It is represented that AFP-RSBS is a pension fund organized and existing under and by virtue of Presidential Decree (PD) No. 361, as amended by PD No. 1656; that it is the absolute and registered owner of twenty-four (24) parcels of industrial lots located in Bgy. Sabang, Municipality of Morong, Province of Bataan; and that it sold the said parcels of lots to Subic Bay Development and Industrial Estate Corporation (SUDECO). 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 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: . . ." HAaScT Such being the case, any gains derived from the sale of the above-mentioned properties owned by AFP-RSBS, a qualified pension plan within the contemplation of R.A. No. 4917, as amended, is not subject to income tax and consequently to withholding tax prescribed under Revenue Regulations No. 2-98, as amended. 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 as null and void. HCDaAS Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service