Tax Imposed on Trust Fund

July 22, 1981 BIR RULING NO. 120-81 56-b 000-00 120-81 Messrs. Sycip, Gorres, Velayo & Co. P.O. Box 589, Manila Attention: Atty . M . C . Gutierrez Tax Division Gentlemen : This refers to your letter dated January 25, 1978 requesting a ruling on the following: cdtech (1) Whether or not the members of the Pilots Occupational Disability Fund will be taxed at the time of contributions by the employer, or at the time of distribution or payment under the plan to the members; (2) Whether or not the contributions to the fund by the employer are deductible; and (3) Whether or not the income of the fund are exempt. It is represented that the Air Line Pilots Association of the Philippines establishes the Pilots Occupational Disability Fund which aims to provide payment of definite amounts to its members who suffer personal injury or illness resulting in their inability to act in the capacity for which they hold a Civil Aeronautics Administration License; that the Fund shall be established on the basis of contribution to be made by PAL which shall be credited to an account to be known as the Pilots Occupational Disability Fund; that the monthly contribution of each member to the Fund shall be payable by PAL which shall be an amount equal to 5% of the monthly guarantee pay of each member; that the Fund shall be composed of all contributions made by PAL together with any income, repayments or gains, less all disbursements, losses, claims and liabilities and administrative expenses; and that all contributions made by PAL to the Fund shall be held, solely and exclusively, for the benefit of the members or their beneficiaries, and no part of said contribution, or its income, shall be used for or diverted for purposes other than for the exclusive benefit of such members and their beneficiaries. In reply thereto, I have the honor to inform you that any and all amounts actually received or distributed from the trust fund to any employee or distributee over and above his personal contributions shall be taxable to him in the year in which so distributed. [Sec. 56(b), Tax Code]. The contributions to be made by the employer to the fund are deductible from its gross income pursuant to Section 30(a) of the Tax Code, as amended. The Pilots Occupational Disability 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. The income of the trust fund from its investment activities 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. cdta Very truly yours, RUBEN B. ANCHETA Acting Commissioner