BIR Ruling No. 364-2021

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BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE

Quezon City

BDO Unibank, Inc. Trust and Investment Group 7899 Makati Ave., Makati City 16/F BDO South Tower, BDO Corporate Center Sec. 60(B). NIRC of 1997, as amended BIR Ruling Nos. 076-2012 & 613-2018 V-E4-7021 DCT 1 4 2021

Attention Nina B. Almeida AVP / Account Officer Gentlemen:

the National Internal Revenue Code (Tax Code) of 1997, as amended. Corporation continues to be tax exempt within the contemplation of Section 32(B)(6)(a) of This refers to your letter requesting confirmation that Provident Plan for Petron

augmenting the benefits upon retirement for regular employees of the Company and to encourage employees to save and accumulate a portion of their earnings during employment. in order for the payment of definitely determinable benefits to such empioyees upon retirement. of the Company. Corporation effective January l, 1985 with the primary objective of supplementing and The Plan shall be financed from contributions made by the members and from the contributions It is represented that the Petron Corporation created the Provident Plan for Petron

provides that: In reply thereto, please be informed that Section 60 (B) of the Tax Code. as amended.

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 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 of all liabilities with respect to 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. . . under the trust instrument it is impossible, at any time prior to the satisfaction "Sec. 60 (B) Exception. - The tax imposed by Title II shall not apply

earnings of a retirement fund may be exempt from income tax, to wit: l) the contributions are made to the trust by the employer, or employees, or both; 2) such contributions are made 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 3) under the trust instrument it is used for. or diverted to, purposes other than for the exclusive benefit of the employees. impossible (in the taxable year and at any time thereafter prior to the satisfaction of all) liabilities with respect to employees under the trust) for any part of the corpus or income to be The above-cited provision lays down the following requirements in order that the

Provident Fund for Petron (Corporation Page 2 of 3

withholding thereof are embraced within the title on "Income Tax", it follows that said trust is also exempt from the coverage of the withholding tax regulations: Petron Corporation, thus, it is exempt from income tax. Since the final tax and the It is noted that the foregoing conditions are present in Provident Plan for

respondent Court of Appeals in affirming the decision of the Court of Tax Appeals, which ruled: 95022, promulgated on March 23, 1992, the Supreme Court upheld the judgment of the In the case of Commissioner of Internal Revenue vs. Court of Appeals, G.R. No.

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

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

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provide economic assistance to employees upon occurrence of certain contingencies, particularly, 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 and additional source of protection for ihe working group. What is more, it is established for their exclusive benefit and for no other purpose. of employees' trusts. Employees' trusts or benefit plans normally And rightly so, by virtue of the raison de'etre behind the creation

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

or charge, it is proposed that a similar system providing Social Security Act be exempted from inconie: taxes. for retirement, etc. benefits for employees outside the (Congressional Record. House of Representatives, Vol. IV, Part 2, No. 57. p. 1859. May 3. 1957: cited in Security Act, all contributions collected and paynents 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 Considering that under Section 17 of the Social

Provident Fund for: Petron Corporation Page 3 of 3 CT-: qC{ i } 42}

Co., et al., G.R. No. L-22611, May 27. 1968, 23 SCRA Commissioner of Internal Revenue vs. Visayan Electric 75

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

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declared "exempt "(Sec. 56(b), now Sec."53(b). Tax "Code)." The yield from deposit substitutes is essentially to maximize and expedite the collection of income taxes by requiring its payment at the source. If an employees' trust like the GCL enjoys a tax-exempt status from income. we see no logic in withholding a certain percentage of that income which it is not supposed to pay in the first place. collected from income in respect of which"employees' trusts are application of the withholding system to interest on bank deposits or There can be no denying either that the final withholding tax is

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substitutes, trust funds and similar arrangements, are exempt from income tax. and consequently, from final withholding tax. Provided, however, that in its investment activities, no part of the corpus or income of the Fund shall be used for or diverted to purposes other than for the exclusive benefit of the member- employees/officials or their beneficiaries. (BIR Ruling No. 076-2012 dated February 15, 2012) Corporation from its bank deposits, and yietd or any monetary benefit from deposit In view of the foregoing, interest income derived by Provident Plan for Petron

However, if upon investigation, it will be disciosed 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.

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Commissioner of Internal Revenue CAESAR R. DULAY

W JA5335

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K-1/14.068