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BIR Ruling No. 051 2000 PDF
BIR Ruling No. 051 2000 PDF
Gentlemen :
This refers to your letter dated November 24, 1998 requesting for a ruling on
the tax consequence of the withdrawal of contributions by some of its employees
representing their contributions to the said Fund.
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia 2017 1
However, the income or earnings derived from the personal contributions by
the employee-members' are subject to income tax since in a retirement plan under
R.A. No. 4917 [now Section 32(B)(6)(a) of the Tax Code of 1997], the employer, or
officials and employees or both, contribute to a trust fund for the purpose of
distributing to such officials and employees or their beneficiaries, the corpus and
income accumulated by the trust in accordance with the plan. Section 2(d) of Revenue
Regulations No. 1-68, as amended, provides for exemption from income tax only the
benefits received by officials or employees upon retirement, in accordance with the
BIR-approved Retirement Plan rules or written program. In other words, in order to be
exempt from the payment of income tax, the benefits must be paid or distributed to
the officials or employees upon their retirement from the service and not while they
are still in the employ of the company-employer. In the instant case, the
earnings/income of the personal contributions of the employees constitute benefits
(not retirement benefits envisaged by the trust fund trustee to the employee) not upon
their retirement but while they are still in the service of the school colleges,
universities and Society of Divine Word (SVD) Education Secretaries office owned
and operated by SVD. Consequently, pursuant to Section 60(B) of the Tax Code of
1997, any and all amounts actually distributed to said member-employees over and
above their personal contributions shall be taxable to them in the year in which so
paid or distributed, considering that such distribution has been effected before their
retirement from SVD. This means that, only upon retirement, the total benefits which
the employees shall receive consisting of their personal contributions, counterpart
contribution of the employer and the income of the Fund to which the employees are
entitled and are distributed to them shall be exempt from income tax.
This ruling is being issued on the basis of the foregoing facts as represented.
However, if upon investigation, it will be disclosed that the facts are different, then
this ruling shall be considered null and void.
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia 2017 2
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia 2017 3