BIR Ruling No. 573-2020

REPUBLICOF THE PHILIPPINES

DEPARTMENT OF FINANCE

BUREAU OF INTERNALREVENUE

Quezon City

Sec.60(B) NIRC;Section 109(P) NIRC CIR vs. GCL Retirement Plan, G.R. No. 95022 BIR Ruling No. ERP-040-2014 BIR Ruling No. ERP-111-2009

OT-0573-2020

No. 12 Manggahan St., Bagumbayan, Quezon City EEI Retirement Fund, Inc. Executive Administration & Services Offices OCT 0 6 2020

Attention: Oscar D.Mercado

Chairman & President

Gentlemen:

Retirement Fund, Inc. ("ERFI"), as trustee, of a parcel of land registered under the name of ERFI in trust for the EEI Corporation Retirement Fund, is exempt from from the creditable withholding tax. income tax under Section 60(B) of the 1997 Tax Code, as amended, and consequently, This refers to your request for a confirmatory ruling that the sale by EEI

implement the provisions of the EEI Retirement :Plan for the exclusive benefit of the : It is represented that the EEI Corporation Retirement Fund was created to

amendments made in the Retirement Plan Rules in 2009 were also approved by the BIR in BIR Ruling No. ERP No. 281-2009; and that since 2009 to date, no amendments plan within the contemplation of Section 32(B)(6)(a) of the 1997 Tax Code, as 24, 2003, the Bureau of Internal Revenue (BIR) declared EEI Retirement Plan as a reasonable retirement plan within the contemplation of law; that the subsequent were made in the Retirement Plan, hence, it remained to be a reasonable private benefit employees of the EEI Corporation; that in BIR Ruling No. ERP-73-2003 dated April amended.

of land which was registered under the name of ERFI in trust for the EEI Corporation Retirement Fund as evidenced by Transfer Certificate of Title (TCT) No. issued by the Registry of Deeds for Quezon City. It is further represented that EEI Corporation Retirement Fund acquired a parcel

sale of the subject parcel of land by EEI Corporation Retirement Fund is not subject to income tax, and consequently, to the creditable withholding tax, in accordance with Section 60(B) of the 1997 Tax Code, as amended. Based on the foregoing representations, you now request confirmation that the

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exemption of income derived by a retirement benefit fund is Section 60(B) of the 1997 Tax Code, as amended, to wit: In reply, please be informed that the governing provision relative to the tax

"Section 60(B). Imposition of Tax.-

earnings and principal of the fund accumulated by the trust in accordance with such plan, and (2) if under the trust the trust, for any part of the corpus or income to be (within the taxable year or thereafter) used for, or diverted to, year in which so distributed to the extent that it exceeds the amount contributed by such employee or distributee. benefit of some or all of his employees (1) if contributions both for the purpose of distributing to such employees the instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees under purposes other than for the exclusive benefit of his to any employee or distributee shall be taxable to him in the stock bonus or profit-sharing plan of an employer for the are made to the trust by such employer, or employees, or employees: Provided, That any amount actually distributed not apply to employee's trust which forms part of a pension (B) Exception. - The tax imposed by this Title shall

the same as a reasonable retirement benefit plan in BIR Ruling No. ERP -73-2003 and are made to the trust by the employer, or employees, or both for the purpose of the trust .incaccordanceowith,.such plan;.and.(2)..under..the..trust instrumentat.eis+ or employees under the trust, for any part of the corpus or income to be used for, or diverted to, purposes other than for the exclusive benefit of the employees. (BIR Ruling No. ERP-040-2014 dated March 25, 2014). These two (2) conditions are sufficiently met by the EEI Corporation Retirement Plan as in fact, this Office had already approved BIR Ruling No. ERP-281-2009. earnings of a retirement fund may be exempt from income tax, viz: 1) the contributions impossible, at any time prior to the satisfaction of all liabilities with respect to distributing to such employees.the.earnings and.principal.of.the. fund.accumulated by The above-cited provision sets forth two (2) conditions in order that the

fund from its investments had already been settled in the case of Commissioner of Appeals which affirmed the decision of the Court of Tax Appeals, the pertinent portion of which is quoted below: 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 It bears mentioning that the tax exemption of the income derived by a retirement

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

EEl Corporation Retirement Plan Page 3 of 4 'bc : 'uad. 2.

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

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

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

No. L-22611, May 27, 1968, 23 SCRA 715). fee, or charge, it is proposed that a similar system providing for be exempted from income taxes." (Congressional Record, House of Commissioner of Internal Revenue vs. Visayan Electric Co., et al., G.R. retirement, etc. benefits for employees outside the Social Security Act Representatives, Vol. IV, Part 2, No. 57, p. 1859, May 3, 1957; cited in the income of the pension trust are exempt from any tax, assessment, all contributions collected and payments of sickness, unemployment, retirement, disability and death benefits made thereunder together with Considering that under Section 17 of the Social Security Act,

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

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Corporation, is exempt from income tax, and consequently, from creditable subsequent case of Miguel J. Ossorio Pension Foundation, Incorporated vs. Court of Appeals and Commissioner of Internal Revenue, G.R. No. 162175, June 28, 2010. withholding tax, on its sale of a parcel of land covered by TCT No. retirement benefit plan established for the benefits of the employees of EEI by the Registry of Deeds for Quezon City. Accordingly, the EEI Corporation Retirement Plan, being a reasonable The above pronouncement of the Supreme Court was reiterated in the issued

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

Very truly yours,

CAESAR R.DULAY Commissioner of Internal Revenue

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