PAF Aviation Cadet Alumni Assn., Inc. Mutual Benefit System/Pension Plan Not Subject to 6% Premium Tax

April 8, 1985 BIR RULING NO. 052-85 56 000-00 052-85 Gentlemen : This refers to your letter dated November 6, 1984, stating that during their annual General Assembly on June 16, 1984, the members of the PAF Aviation Cadet Alumni Association, Inc. have decided to establish a Mutual Benefit System/Pension Plan which will provide death and disability benefits to said members or their heirs/next-of-kin; that each member shall contribute P50.00 a month for seven (7) years, after which the interest earned on accumulated capital shall be sufficient to cover the expected annual death/disability rates; that each member shall receive from the System the amount of P50,000 upon disability or by his heir upon a member's death; that no separate agency or office shall be created to manage or operate the System; that only the officials and members of the association shall manage and operate the System without receiving any honorarium, allowances, salaries, commissions, or any other form of emoluments. Based on the foregoing representations, you now request information as to whether the said Mutual Benefit System/Pension Plan is subject to the premium tax on the monthly or periodic contributions of its members. In reply, please be informed that as a trust fund established for the exclusive benefit of its members, the PAF Aviation Cadet Alumni Association, Inc. Mutual Benefit System/Pension Plan is not an insurance company within the contemplation of Section 263 of the Tax Code as amended by Presidential Decree No. 1959 and is, therefore, not subject to the premium tax of 6% on the monthly or periodic contributions of the members. However, it is subject to income tax on income from investments of the fund pursuant to Section 21(b) in relation to Section 56(a) and (c) both of the Tax Code, as amended. Accordingly, it is subject to the 15% final withholding tax on its interest and/or yield on deposit substitute instruments as well as on interest on its savings and time deposits paid or accrued beginning October 15, 1984. aisadc Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner