Whether the AFP Retirement and Separation Benefit System (AFPRSBS) is Subject to Income Tax/Creditable Withholding Tax on Its Sale of Real Property

February 8, 1994 BIR RULING NO. 041-94 53 (b) 000-00 041-94 Galland Realty & Development Corporation Rm. 304, Anita Building Quezon Avenue corner Timog St. Quezon City Attention: Mr . Rodolfo C . Gallardo President Gentlemen : This refers to your letter dated January 28, 1994 requesting for a ruling as to whether or not the AFP Retirement and Separation Benefit System (AFPRSBS) is subject to income tax/creditable withholding tax on its sale of real property to you on January 26, 1994. It appears that pursuant to a Deed of Absolute Sale executed by and between the AFPRSBS and Galland Realty & Development Corporation on January 26, 1994, the former sold to the latter parcels of land containing an aggregate area of one hundred forty-eight thousand, two hundred sixty-two (148,262) square meters, located in Barrio Ampid, Municipality of San Mateo, Province of Rizal, and covered by 126 individual Transfer Certificates of Title enumerated in the attached list marked as Annex "A", and described in the document of sale. In reply, please be informed that the AFPRSBS was qualified to be an employee's trust within the purview of Section 53 (b) [-formerly Section 56 (b)] of the Tax Code per our letter dated June 23, 1993. Accordingly, the income of the trust fund from its investment is exempt from income tax and consequently from the withholding tax pursuant to Section 53(b) of the Tax Code, as amended. In view thereof, the sale of the AFPRSBS of the aforementioned parcels of land in your favor is exempt from income tax and from the 5% creditable withholding tax prescribed by Revenue Regulations No. 12-89 as amended by Revenue Regulations No. 1-90. cdtech Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue