BIR Ruling No. 152-14

May 29, 2014 BIR RULING NO. 152-14 Section 60 (B) of the 1997 Tax Code, as amended; City of Iloilo, et al. vs. Smart Communications, Inc. G.R. No. 167260 dated February 27, 2009 Bank of the Philippine Islands Asset Management and Trust Department 17th Flr. BPI Building 6768 Ayala Avenue, Makati City Attention: Maria Paz Agojo-Garcia Vice President Anna Katrina Kabigting-Ibero Manager Gentlemen : This refers to your letter dated October 17, 2011 requesting for a ruling on whether or not the income earned by the retirement plans duly qualified by the Bureau of Internal Revenue (BIR) as a "reasonable private benefit plans" from their investment in shares of stocks listed and traded through the Philippine Stock Exchange (PSE) is exempt from the stock transaction tax under section 127 (A) of the Tax Code of 1997 pursuant to Section 60 (B) of the same Code. It is represented that the Bank of the Philippine Islands (BPI) is a commercial bank duly organized and existing under Philippines laws; that it has been authorized by the Bangko Sentral ng Pilipinas to perform trust and other fiduciary functions, through its Trust and Investment Group; that given such authority, it is the trustee of various retirement plans, duly qualified by the BIR as "reasonable private benefit plans" within the contemplation of R.A. 4917 ("Qualified Retirement Plans"); that these Qualified Retirement Plans have investments in various investment outlets including shares of stock listed and traded in the PSE. In reply thereto, please be informed that Section 60 (B) of the Tax of 1997 as amended, provides that "Sec. 60(B). Exception. The tax imposed by title II shall not apply to employees' trust which forms part of a pension, stock bonus, or profit-sharing plan of an employer for the benefit of some or all of his employees (1) if contributions are made to the trust by such employer, or employees, or both for the purpose of distributing to such employees the earnings and principal of the fund accumulated by the trust in accordance with such plan, and (2) if under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees under the trust, for any part of the corpus or income to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of his employees. . . ." (Emphasis supplied) ADHcTE The foregoing provision categorically exempts employees' trust from income tax. It must be noted, however, that the tax incentive provided under the above-quoted provision is limited only to Title II which refers to income tax. Thus, exemption from stock transaction tax, which is a percentage tax under Title IV of the 1997 Tax Code, as amended, is not covered by Section 60 (B) of the same Code. It is well settled that he who claims an exemption from his share of the common burden of taxation must justify his claim by showing that the Legislature intended to exempt him by words too plain to be beyond doubt or mistake, consistent with the principle that tax exemptions must be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. (City of Iloilo, et al. vs. Smart Communications, Inc. G.R. No. 167260 dated February 27, 2009). In fine, any income earned by BPI's various Retirement Plans from investments in shares of stocks listed and traded through the Philippine Stock Exchange (PSE), is not exempt from the stock transaction tax under Section 127 (A) of the Tax Code of 1997, as amended. Please be guided accordingly. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner Bureau of Internal Revenue