BIR Ruling No. 355-2022

REPUBLIC OF THE PHILIPPINES

BUREAU OF INTERNAL REVENUE DEPARTMENT OF FINANCE

Quezon City

Section 60 (B) of the Tax of BIR Ruling Nos. OT-527-20 Code of 1997, as amended & ERP-040-2014 0355-202Z

JUL 2-6 2022 Shell Companies in the Philippines Corner 9th' Avenue, Bonifacio Global City Multi-Employer Retirement Plan 41st Floor, The Finance Center, 26th Street Brgy. Fort Bonifacio, Taguig City, Metro Manila

Gentlemen: Attention: FARIDA NIMFA GUYALA-DIMAHLIG Country Tax Manager

in the Philippines Multi-Employer Retirement Plan (SCIP MERP) of its shares of stocks in Tabangao Realty, Inc. (TRI) in favor of Citadel Holdings, Inc. (CHI) is exempt from capital gains tax (CGT) pursuant to Section 60(B) of the National Internal Revenue Code (Tax Code) of 1997, as amended. This refers to your request for confirmation that the assignment made by Shell Companies

revised Multi-Employer Retirement 'Plan of SCIP MERP; that SCIP MERP owns 60% of TRI and in consideration of the sum of Pht Revenue (BIR) on October 26, 2009; that on August 24, 2015, the BIR issued an approval of the which is equivalent to November 3, 2021, the trustees of SCIP MERP, represented by its Chairman & Trustee, Lorelie Q. Osial, sold, ceded, transferred and conveved its It is represented that SCIP MERP was formally registered with the Bureau of Internal common shares, with par value of Phpl.00 per share; that on . Hence, this request. common shares in TRI to CHI for

income derived by a retirement benefit fund is Section 30 (B) of the Tax Code of 1997, as amended. which states that: In reply, please be informed that the governing provision relative to the tax exemption of

"Section 60(B). Imposition of Tax.

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to any employee or distributee shall be taxable to him in the year in which so taxable year or thereafter) used for, or diverted to, purposes other than for the employees under the trust, for any part of the corpus or income to be (within the exclusive benefit of his employees: Provided, That any amount actually distributed employee's 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 {B} Exception. - The tax imposed' by this Title shall not apply to

or- 355-2 022

JUL 2 6 2022

distributed to the extent that it exceeds the amount contributed by such employee or distributee.

earnings and principal of the fund accumulated by the trust in accordance with such plan; and (2) 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 used for, or diverted in fact, this Office had already approved the same as a reasonable retirement benefit plan in BIR retirement fund may be exempt from income tax, to wit: 1) the contributions are made to the trust by the employer, or employees, or both for the purpose of distributing to such employees the to, purposes other than for the exclusive benefit of the employees. (BIR Ruling No. ERP-040-201 4 dated March 25, 2014). These two (2) conditions are sufficiently met by the Retirement Fund as Certification/Ruling No. ERP-027-2015 dated August 24, 2015. The above-cited provision sets forth two (2) conditions in order that the earnings of a

its investments had already been settled in the case of Commissioner of Internal Revenue vs. Court of Appeals, G.R. No. 95022, promulgated on March 23, 1992, where the Supreme Court upheld the judgment of the respondent Court of Appeals which affirmed the decision of the Court of Tax Appeals, the pertinent portion of which is quoted below: It bears mentioning that the tax exemption of the income derived by a retirement fund from

Act (R.A.) No. 4917 approved on June 17, 1967. This law specifically provided: income tax by the Commissioner of Internal Revenue in accordance with Republic . . it is significant to note that the GCL Plan was gualified as exempt from

retirement benefits received by officials and emplovees of private firms equitable process whatsoever except to pay a debt of the official or employee concerned to the private benefit plan or that arising from liability imposed in a criminal action: benefit plan maintained by the employer shall be exempt from all taxes and shall not be liable to attachment, levy or seizure by or under any legal or whether individual or corporate, in accordance with a reasonable private Sec. 1. Any provision of law to the contrary notwithstanding, the

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established for their exclusive benefit and for no other purpose. and additional source of protection for the working group. What is more, it is employees' trusts. Employees' trusts or benefit plans normally provide economic old age retirement, death, sickness, or disability. It provides security against certain hazards to which members of the Plan may be exposed. It is an independent assistance to employees upon occurrence of certain contingencies, particularly. And rightly so, by virtue of the raison de'etre behind the creation of

portion of the explanatory note to H. B. No. 6503, now R.A. 1983, reading: to encourage the formation and establishment of such private plans for the benefit of laborers and employees outside of the Social Security Act. Enlightening is a The tax advantage in R.A. No. 1983, Section 56(b), was conceived in order

contributions collected and payments of sickness, unemployment, retirement, disability and death benefits made thereunder together with the income of the pension trust are exempt from any tax, assessment, fee, or charge, it is proposed that a similar system providing for retirement, etc. benefits for employees outside the Social Security Act be exempted from Considering that under Section 17 of the Social Security Act, all

Of- 3 5 5 - 2 0 2 2 JUL 2 6 2022

Part 2, No. 57, p. 1859, May 3, 1957; cited in Commissioner of Internal Revenue vs. Visayan Electric Co., et al., G.R. No. L-22611, May 27. 1968. income taxes." (Congressional Record, House of Representatives, Vol. IV)

23 SCRA 715).

the pension trust. Otherwise, taxation of those earnings would result in a diminution of accumulated income and reduce whatever the trust beneficiaries would receive out of the trust fund. This would run afoul of the very intent of the law. It is evident that tax exemption is likewise to be enjoyed by the income of

Miguel J. Ossorio Pension Foundation, Incorporated vs. Court of Appeals and Commissioner of Internal Revenue, G.R. No. 162175, June 28, 2010. The above pronouncement of the Supreme Court was reiterated in the subsequent case of

expanded withholding tax prescribed under Revenue Regulations No. 2-98 as amended. made:by SCIP MERP of its consideration of Php In view of the foregoing. this Office hereby confirms your opinion that the assignment is not subject to CGT and consequently from the final common shares in TRI in favor of CHI for a total

a percentage tax under Title V of the Tax Code of 1997, as amended. Thus, the assignment of the shares, if listed and traded in the local stock exchange shali be subject to the stock transaction tax Republic Act No. 10963. imposed under Section 127 (A) of the same Code. Moreover, such assignment is subject to documentary stamp tax at the rate of Php1.50 on each Php200.00, or fractional part thereof, of the par value of such stock as prescribed in Section 175 of the Tax Code of 1997, as amended by However, the exemption from income tax does not include stock transaction tax which is

considered as null and void. upon investigation, it will be disclosed that the facts are different, then this ruling shall be This ruling is being issued on the basis of the foregoing facts as represented. However, if

Commissioner of Internal Revenue LILIA CATRIS GUILLERMO hul l Guill

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