BIR Ruling No. 055-12

February 9, 2012 BIR RULING NO. 055-12 Secs. 27 (A) NIRC; BIR Ruling No. 012-11 Bernaldo Directo & Po Law Offices Unit 1807 Cityland Condominium 10 Tower 1, 6815 Ayala Ave. cor. Dela Costa Sts. Makati City Attention: Pepito G. Po Partner Gentlemen : This refers to your letter dated January 20, 2011 requesting, in behalf of your client Ace/Saatchi & Saatchi Advertising, Inc. ("Ace Saatchi"),for approval on the reversion of excess retirement fund contributions made by Ace Saatchi to its retirement benefit plan, Ace Saatchi and Saatchi Advertising Retirement Plan ("Retirement Fund"). It is represented that Ace Saatchi is a domestic corporation duly organized and existing under the laws of the Philippines with principal office address at Saatchi House No. 2296 Don Chino Roces Avenue, Kayamanan C, Pasong Tamo Extension, Makati City; that Ace Saatchi is engaged in the conduct of general advertising and creation and production of materials or subsequent advertisements in television, print, radio, cinema and other media, primarily as an agent; that Ace Saatchi established the Retirement Fund covering all its officers and regular employees, which was duly approved by the Bureau of Internal Revenue (BIR) as a reasonable private benefit plan; that the Retirement Fund is under the administration of a trustee bank, BPI Asset Management Group, with office address at 7/F, BPI Building, Ayala Avenue cor. Paseo de Roxas, Makati City; that as of January 1, 2011, after conducting an actuarial valuation for funding and financial reporting requirements, it was determined that the Retirement Fund has excess assets over its accrued liability amounting to Seventeen Million Seventy Five Thousand Three Hundred Pesos (Php17,075,300.00) and that there is no required contribution for 2011 plan year; and that in order to meet working capital requirements and minimize third party borrowings, Ace Saatchi intends to revert back to the company the excess retirement funding to the extent of Ten Million Pesos (Php10,000,000.00). TSAHIa In reply, please be informed that the portion of the fund of the Retirement Plan in excess of the amount actuarially determined to cover the benefits of all the employees of Ace Saatchi, to the extent of Ten Million Pesos (Php10,000,000.00), may be reverted back to Ace Saatchi without terminating the fund. Provided, however, that Ace Saatchi should declare as income the said Ten Million Pesos and pay the corresponding income tax thereon as prescribed in Section 27 (A) of the Tax Code of 1997, as amended. ( BIR Ruling No. 012-11 dated January 19, 2011 ) 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.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue