MORNBFI Vol. 1 - Planters Development Bank

§§ 4409Q.7 - 4409Q.909.12.31§ 4409Q.7 Operating and accountingmethodology. Trust and other fiduciaryaccounts shall be operated and accountedfor in accordance with the following:a. The trustee or fiduciary shalladminister, hold or manage the fund orproperty in accordance with the instrumentcreating the trust or other fiduciaryrelationship; andb. Funds or property of each clientshall be accounted separately and distinctlyfrom those of other clients herein referredto as individual account accounting.§ 4409Q.8 Tax-exempt individual trustaccounts. The following shall be the features/requirements of individual trust accountswhich may be exempted from the twentypercent (20%) final tax under Section24(B)(1) of R.A. No. 8424 (The Tax ReformAct of 1997):a. The tax exemption shall apply totrust indentures/agreements contracted onor after 03 January 2000;b. The trust indenture/agreement shallonly be between individuals who are Filipinocitizens or resident aliens and QBs acting astrustee. The trust indenture/agreement shall benon-negotiable and non-transferable;c. The trust indenture/agreement shallindicate that pursuant to Section 24(B)(1) ofR.A. No. 8424, interest income of the trustfund derived from investments in interestbearinginstruments (e.g., time deposits,government securities, loans and other debtinstruments) which are otherwise subject tothe twenty percent (20%) final tax shall beexempt from said final tax provided the fundwas held by the trustee-QB for at least five(5) years. If said fund was held for a periodless than five (5) years interest income shallbe subject to a final tax based on thefollowing schedule –Holding PeriodRate of TaxFour (4) years to less than five (5) years 5%Three (3) years to less than four (4) years 12%Less than three (3) years 20%Necessarily, the trust indenture/agreement shall clearly indicate the datewhen the trustee-bank actually received thetrust funds which shall serve as basis fordetermining the holding period of the funds.d. A trustee may accept additionalfunds for inclusion in trust accounts whichhave been established as tax-exempt underR.A. No. 8424. However, the receipt ofadditional funds shall be properlydocumented by indicating that they are partof existing tax-exempt trust accounts andthat the interest income of the additionalfunds derived from investments in interestbearinginstruments shall be exempt fromthe twenty percent (20%) final tax under thesame conditions mentioned in the precedingitem. The document shall also indicate thedate when the funds were received by thetrustee-bank to serve as basis for determiningthe minimum five (5) - year holding periodfor tax exemption purposes of the additionalfunds; ande. Tax-exempt individual trustaccounts established under this Subsec.shall be subject to the provisions of Subsecs.4409Q.1(c) and 4409Q.2 up to 4409Q.7.§ 4409Q.9 Living trust accountsThe guidelines on living trust accounts areas follows:a. Definition. Living Trust is definedunder the Manual of Accounts for Trust, asa personal trust created by agreement.It becomes operational during the lifetimeof the trustor as soon as the agreement isaccomplished.Under a living trust, the trustor (alsoknown as settlor) conveys property or a sumof money to be managed by the trustee, asthe agreement dictates, for the benefit of thetrustor and third person(s) or third person(s)only. However, the trustor/s cannot createa trust with himself/ themselves as the solebeneficiary/(ies). The functions andauthorities of the trustee as defined in theagreement shall include:Q RegulationsPart IV - Page 18Manual of Regulations for Non-Bank Financial Institutions