AFP Retirement and Separation Benefits System

August 11, 2009 BIR RULING [DA-(C-174) 457-09] Sec. 60 (B); DA-335-05 AFP Retirement and Separation Benefits System Camp General Emilio Aguinaldo Quezon City Attention: Atty. Rolando G. Borja Head Legal Department Gentlemen : This refers to your letter dated June 25, 2009 requesting for confirmation that the sale of real property by the AFP Retirement and Separation Benefits System (AFPRSBS) is not subject to income tax/capital gains tax/withholding tax pursuant to Section 60 (B) of the Tax Code of 1997. cEATSI It is represented that AFPRSBS is an employee's trust fund established under Presidential Decree (PD) 361, as amended by PD 1656; that. AFPRSBS regularly engages in the sale of real property to the public; that for purposes of securing the Certificate Authorizing Registration from the respective Revenue District Offices (RDO), it usually presents that latest BIR Ruling affirming its tax-exempt status; and that while working for the title transfer of a real property situated in Brgy. Prado, Umingan, Pangasinan, the RDO required the issuance of a new ruling regarding the said tax exemption. 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 off his employees. . ." Considering that AFPRSBS is an employee's trust fund established under P.D. 361, as amended by PD 1656, for the exclusive benefit of all the military members or commission officers and enlisted personnel of the Armed Forces of the Philippines (AFP) and the corpus or income of the fund is not used for or diverted to purposes other than for the exclusive benefit of the military members or commission officers and enlisted personnel of the AFP and their beneficiaries, this Office maintains its position that the AFPRSBS is still considered an employees' trust and, therefore, income of the trust fund from its investments remain exempt from income tax and consequently from withholding tax pursuant to Section 60 (B) of the Tax Code of 1997. (BIR Ruling No. DA673-99 dated December 12, 1999) Accordingly, this Office hereby confirms your opinion that the sale by the AFPRSBS of the real property situated in Pangasinan is not subject to income tax/capital gains tax/withholding tax pursuant to Section 60 (B) of the Tax Code of 1997. cTCEIS 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