Plan on the Certificate of Qualification for Tax-Exemption

May 26, 1988 BIR RULING NO. 214-88 28 (b) (7) (A) 000-00 214-88 M a d a m : This refers to your letter dated May 24, 1988 requesting a ruling on a query stated as follows: "If for some reasons, a retirement plan's application for tax-exemption has not been acted upon by the Bureau of Internal Revenue for some time, say, 3 to 9 months, or even for more than a year, can the plan specially its retiring members avail, for the meantime, of the tax benefits? "If BIR finds out certain defects after this reasonably long period of time, can the company just correct the defect? Or is it still necessary for the employees who have separated at the time that the plan was awaiting approval to still return whatever tax exemption benefits they have availed of?" In reply, please be informed that any type of plan that may be adopted or maintained by the employer for his/its employees must qualify under existing laws and regulations before a certificate of qualification for tax-exemption is issued by this Office. In other words, the aforementioned qualification of the plan must be determined, adjudicated and approved first by this Office before the plan as well as the covered employee-members can be entitled to the corresponding benefits and privileges provided for by law. Accordingly, if this Office finds that the plan qualifies under Republic Act No. 4917, now Section 28(b)(7)(A) of the Tax Code, as amplified by Revenue Regulations No. 1-68 and 1-83, such qualification retroacts as of the date of effectivity of the Plan as indicated in its written program; otherwise, if the plan contains objectionable features, thus, failing to qualify under the said law and its implementing regulations, the employer-company may rectify or modify the plan but until such time that the plan is modified and/or rectified, the fund created to implement the provisions of said Plan is not exempt from income tax; all trust income is fully taxable to the trust; and any and all amounts actually distributed or made available to a distributee or member are taxable to him in the year in which they are distributed or made available, in which case, the employees who have retired under that unqualified plan shall be assessed the corresponding deficiency income tax on the retirement benefits received by them. cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner