BIR Ruling No. 036-83

March 10, 1983 BIR RULING NO. 036-83 Gentlemen : This refers to your request for reconsideration of BIR Ruling dated July 26, 1978 insofar as its dispositive portion holding that any and all amounts actually received or distributed from the CB Provident trust fund to any employee-member or distributee over and above his personal contributions shall be taxable to him in the year in which so distributed. You contended that Presidential Decree No. 220 was amended only with respect to the retirement benefits of private firms; that the tax-exemption under PD 220 still exists insofar as the retirement gratuities, pensions and other similar benefits of retiring employees from the Philippine Government agencies, e.g., Central Bank of the Philippines (CB), are concerned, and that, therefore, pursuant to Presidential Decree No. 220, any and all amounts actually distributed above his personal contributions is exempt from income tax, irrespective of whether the distribution is effected before or upon retirement or secession from the Bank. In a nutshell, the sole issue to be resolved in this case is whether or not Presidential Decree No. 220 is still in force as to be applicable to the CB Provident Fund and the distributions or payments to its employee-members. In reply, please be informed that even before its tax exemption as an employees' trust under Section 56(b) of the Tax code was adjudicated by this Office under BIR Ruling dated July 26, 1978, the CB Provident Fund as well as the retirement gratuities, pensions and similar benefits paid therefrom were unqualifiedly exempt from income tax under the provisions of Presidential Decree No. 220 which took effect on June 20, 1973. As of June 20, 1973, there were no conditions nor requirements to be complied with for income tax exemption of social security benefits, retirement gratuities, pensions and other similar benefits received by retiring employees and workers, whether received from Philippine or foreign government agencies and other institutions, private or public . However, on June 3, 1977, Presidential Decree No. 1158-A was passed amending certain sections of the National Internal Revenue Code of 1939 for incorporation in the consolidation and codification of all existing revenue laws, i.e., as of June 3, 1977 under Presidential Decree No. 1158. Thus, effective June 3, 1977, sub-paragraph (b) of Section 29 of the National Internal Revenue Code of 1939 was amended by Section 2 of Presidential Decree No. 1158-A by incorporating in the National Revenue Code of 1977, the provisions of Section 1 of Republic Act No. 4917 and of Presidential Decree No. 220 as Section 29(b) (7) (A), (B), (C), (E) and (F) (now Section 29 (c) (7) (A), (B), (C), (D), (E) and (F) thereof. In fact, Section 29(c) (7) (A), (B), (C), (D), (E) and (F) of the Tax Code of 1977, as amended cover the whole subject of Presidential Decree No. 220 and retirement benefits, pensions and similar benefits received by retiring officials and employees only from Philippine Government agencies are among those in the enumeration of items of income excluded from gross income or gross compensation income, as the case may be, which shall be exempt from taxation. Well-settled is the rule of statutory construction, " expressio unius est exclusio alterius ", which means that a statute enumerating things on which it is to operate must be construed as excluding from its operation and effect all things not expressly mentioned therein. (Earl T. Crawford, Statutory Construction, pp. 334-337, par. 195) Accordingly, in order to be exempt from the payment of income tax, the benefits must be paid by the CB to its officials or employees upon their retirement from the service and not while they are still in the employ of the Bank. Such being the case, any and all amounts actually distributed from the CB Provident Fund to an employee-member over and above his personal contributions, e.g., dividends, shall be taxable to him in the year in which so distributed, if the distribution is effected before his retirement from the Bank . In view of the foregoing, and considering that in addition to and as part of the retiring official or employee's retirement gratuity to be received from the CB, the CB Provident Fund Rules and Regulations provide for the payment of definitely determined benefits totally and immediately after retirement of an employee-member (Sec. 1, Art. IV & Art. ((i), CB Provident Fund Rules), this Office hereby modifies its ruling of July 26, 1978 and holds that the CB Provident Fund is an employees' trust exempt from income tax under Section 56(b) of the Tax Code and, therefore, it need not file an income tax return: that the income of the trust fund from its investments are exempt from income tax provided that in its investment activities, no part of the corpus or income of the fund shall be used for or diverted to purposes other than for the exclusive benefit of the member-employees or their beneficiaries; and that pursuant to Section 29(c)(7)(F) of the Tax Code of 1977 as amended, the benefits to be received from the CB Provident Fund by the employee-members upon retirement shall be exempt from income tax . This supersedes BIR Ruling dated July 26, 1978. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner Bureau of Internal Revenue