BIR Ruling No. 282-2021

REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE

Quezon City.

Sec. 60(B); Sec. 174. NIRC of 1997, as amended BIR Ruling No. 396-18 BIR Ruling No. 409-15

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SALVADOR LLANILLO BERNARDO

815-816 Tower One and Exchange Plaza Ayala Triangle, Ayala Avenue, Makati City ATTORNEYS-AT-LAW

Attention: Attys. Mardomeo N. Raymudo, Jr.

Kristine Joy G. Carlos Jocel Isidro S. Dilag

Gentlemen:

Internal Revenue Code of 1997 (Tax Code), as amended, and that the corresponding Tax Clearance the Chief, Legal Division of Revenue Region No. 9B, LaQueMar on February 14. 2019. requesting on behalf of your client, Asian Transmission Corporation Retirement Plan, Inc. (the "Company"): that the sale of shares of stock by the Company in favor of Mitsubishi Motors Corporation Certificate be issued covering the said sale. ("MMC") is not subject to capitat gains tax (CGT) pursuant to Section 60(B) of the National This refers to your letter dated September 26, 2018. which was indorsed to this office by

for the following purpose: Carmelray Industrial Park, Canlubang. Caiamba. Laguna. It was incorporated on January l 1, 2000 and existing under the laws of the Republic of the Philippines, with principal office address at It is represented that the Company is a non-stock. non-profit corporation duly organized

Fund for the payment of benefits of the errployees of Asian Transmission beneficiaries in the event of death such employees, subject to such conditions and limitations as may be set thereafter." Corporation when they are retired, disabied or separated from service or to their "To provide, through a Retirement Fund, and to administer and manage such

As such, the BIR ruled that such amendments to the Plan Rules do not affect the Plan's Company, which took effect on January 1, 2000. are not prejudicial to its employees-members amendments to the Rules and Regulations of the Retirement Plan (the "Pian Rules") of the In 2003, the Company was issued BiR Ruling No. ERP-164-2003 confirming that the

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Asian Transmission Corporation Retirement Fund Section 60(B)-sale of unlisted shares of stocks

no longer subject to the 20% final tax on interest and/or yield on deposit substitute instruments qualification under Section 32(B)(6)(a) of the Tax Code, as amended. Consequently, the Plan is

and on interest on its Philippine currency bank deposits.

shares of stock of Asian Transmission Corporation ("ATC"). with par value of Phpl00 per share. The Company is the registered owner of

covered by the following stock certificates with the corresponding details (the "Shares"):

Stock Certificate No. C B C E B B B A November 28, 1998 February 9, 1994 February 9, 1994 April 28, 1995 June 30, 1998 May 15,2008 July 21, 1993 July 11,1993 Issue Date No. of Shares Par Value Php

E E September 3, 2010 April 4, 2011

TOTAL

and Deed of Absolute Sale of Shares whereby the Company sold to MMC the Shares for the amount of Php On September 13, 2018, the Company and MMC executed a Share Purchase Agreement per share or a total of Php

On September 14, 2018, the Company filed with the BIR a documentary stamp tax (DST) return (BIR Form No. 2000-OT) and a nil CGT return (BIR Form No. 1 707) for the foregoing sale of shares.

of ATC shares on September 13, 20}8. Subsequent to the sale of ATC shares, the Retirement Plan was amended effective January 1. 2019. Plan of the latter, was not amended nor terminated from January 1, 2000 up to the date of the Sale On May 6, 2021, the Corporate Secretary of the Company certified that the Retirement

On June 23, 2020, a Certificate of Qualification as a Reasonable Empioyees' Retirement

not affect its status as a reasonable retirement benefit plan. Benefit Plan (Certificate of Tax Exemption No. RP 080-2020 was issued by the BIR to the Company, confirming that the amendments made on January 1, 2019 in the Retirement Plan do

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

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Section 60(B)-sale of unlisted shares of stocks Asian Transmission Corporation Retiremrent Fund

"Section 60(B). Imposition of Tax.

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

to, purposes other than for the exclusive benefit of the employees. (BIR Ruling No. ERP-040-2014 benefit plan in BIR Ruling No. ERP-164-2003 dated August 4, 2003. respect to employees under the trust, for any part of the corpus or income to be used for, or diverted dated March 25, 2014). These two (2) conditions are sufficiently met by the Company's Retirement Fund as in fact, this Office had already approved the same as a reasonable retirement by the 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) retirement fund may be exempt from income tax. to wit: i) the contributions are made to the trust under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with The above-cited provision sets forth two (2) conditions in order that the earnings of a

the judgment of the respondent Court of Appeals which affirmed the decision of the Court of Tax 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 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

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

to attachment, levy or seizure by or under any legal or equitable employees of private firms, whether individual or corporate, in accordance with a reasonable private benefit pians maintained by the employer shall be exempt from all taxes and shall not be liable process whatsoever except to pay a debt of the official or notwithstanding, the retirement benefits received by officials and Sec. l. Any provision of law to the contrary

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Section 60(B)-sale of unlisted shares of stocks Asian Transmission Corporation Retirement Fund

employee concerned to the private benefit plan or that arising from liability imposed in a criminal action;

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employees' trusts. Employees' trusts or benefit plans normally provide economic And rightly so, by virtue of the raison de'etre behind the creation of

old age retirement, death, sickness, or disability. It provides security against assistance to employees upon occurrence of certain contingencies, particularly.

independent and additional source of protection for the working group. What is more, it is established for their exclusive benefit and for no other purpose. certain hazards to which members of the Plan may be exposed. It is an

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

Act, all contributions co!lected and payments of sickness. unemployment, retirement, disability and death benefits made Considering that under Section 17 of the Social Security

thereunder together with the income of the pension trust are that a similar system providing for retirement, etc. benefits for employees outside the Social Security Act be exempted from exempt from any tax, assessment, fee. or charge, it is proposed income taxes." (Congressional Record, Housef

Co., et al., G.R. No. L-22611. May 27. 1968, 23 SCRA 715) Representatives, Vol. IV, Part 2, No. 57, p. 1859, May 3, 1957: cited in Commissioner of Internal Revenue vs. Visayan Electric

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

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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

established for the benefits of the employees of Asian Transmission Corporation is exempt from Accordingly, the Company's Retirement Fund, being a reasonabie retirement benefit pian

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Asian Transmission Corporation Retirement Fund Section 60(B)-sale of unlisted shares of stocks

income tax and, consequently, from the CGT, on the sale of the aforesaid Shares in favor of MMC. pursuant to Section 60 (B) of the Tax Code, as amended. (BIR Ruling Nos. 396-18 dated March 9. 2018 and 409-15 dated December 14. 2015)

However, a retirement fund or pension trust is only entitled to exemption from income tax

the Tax Code, as amended. under Section 60 (B) of the Tax Code of 1997, as amended. Hence, it may still be subject to other applicable taxes imposed under other provisions of the same Code. Accordingly, the sale of the Company's Retirement Fund to MMC of its Shares is subject to DST pursuant to Section 175 of

percentage tax under Title V of the Tax Code of 1997, as amended. Thus, income from investment in shares of stocks listed and traded in the local stock exchange shall be subject to the stock transaction tax imposed under Section 127 (A) of the same Code. Finally, the exemption from income tax does not include stock transaction tax which is a

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. However, if

Very truly yours.

LAa

Commissioner of Internal Revenue CAESAR R. DULAY 044301

K-I gps(asian transmission corp ret fund)