BIR Ruling [UN-163-95]

April 17, 1995 BIR RULING [UN-163-95] Bank of the Philippine Islands BPI Building, Ayala cor. Paseo de Roxas Makati, Metro Manila Attention: Ms . Cynthia S . Makasiar Senior Manager Mr . Fernandico M . Vinoya, Jr . Accounts Specialist Gentlemen : This refers to your letter dated March 1, 1995 stating that the Del Monte Phil., Inc. (DMPI) Retirement Plan of which you are the trustee bank is a qualified employees' trust plan; that the Plan was granted a certification by the BIR as a qualified and reasonable retirement benefit plan within the contemplation of Republic Act No. 4917, now Section 28(b)(7)(A) of the Tax Code; and that the income of the Trust Fund from its investments is exempt from income tax pursuant to Section 53 (b) of the Tax Code, as amended. cdta Based on the foregoing, you now request for a confirmation that the sale of real estate properties owned by the Fund is exempt from Capital Gains Tax and consequently from the Creditable Expanded Withholding Tax. In reply, please be informed that pursuant to Section 53 of the Tax Code, as amended, the pertinent portion of which reads: xxx xxx xxx "(b) Exception . the tax imposed by this title 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 the 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 the 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: Provided, that any amount actually distributed to any employee or distributee shall be taxable to him in the year in which so distributed to the extent that it exceeds the amount contributed by such employee or distributee." exemption from income tax of the BIR-qualified employees' trust fund applies to all income or earnings of any kind of property held in trust. (Commissioner of Internal Revenue vs. The Hon. Court of Appeals, the CTA, GCL Retirement Benefit Plan, G.R. No. 95022, promulgated March 23, 1992). It shall include interest income from bank deposits and yield from deposit substitutes, as well as gains realized from dealings in real property held as capital assets: Provided, that in the case of the latter, the entire proceeds of the sale shall form part of the retirement fund for the benefit of the member-employees/beneficiaries. In view thereof, the above-described transaction involving the sale of the Fund's capital assets wherein the entire proceeds of the sale are earmarked for the retirement plan fund established by the employer for the benefit of its employees shall be exempt from the capital gains tax and consequently from the creditable expanded withholding tax prescribed under Revenue Regulations No. 6-85, as amended. [BIR Ruling No. 53(b)-89-91-239-92; UN-110-94 dated March 29, 1994; UN-012-95 dated January 5, 1995]. Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)