BIR Ruling

February 13, 1969 Panamin Foundation, Inc. 141 Ayala Avenue Makati, Rizal Attention: Mr . Alberto G . Romulo Executive Director Gentlemen : This refers to your letter dated January 30, 1969 requesting information on the following queries: cdll "(1) Do the books of accounts and receipts of the Foundation (Panamin) have to be presented to your office for registration? "(2) Does the Foundation have to withhold taxes on the salaries of its employees? In reply, I have the honor to inform you that pursuant to Revenue Regulations No. V-1, Department of Finance, as amended by Revenue Regulations Nos. V-35 and V-45, only persons (individual or corporate) liable under the law to pay internal revenue taxes are required to present their books of accounts, internal revenue books, records of receipts and disbursements, additional registers and other records, to the Commissioner of Internal Revenue for approval and registration. It appearing that the Panamin Foundation, Inc. is an exempt organization under Section 27(g) of the Tax Code, the same having been established and is being operated exclusively for the promotion of social welfare, and the upliftment of the country's national minorities, the same is exempt from registration of its books of accounts and receipts. However, the Panamin Foundation, Inc. is required to file on or before April 15 of each year a balance sheet, profit and loss statement and an annual information return under oath, stating its gross income and expenses incurred during the preceding year, and a certificate showing that there has not been any substantial change in its by-laws, articles of incorporation, manner of operation and activities, as well as sources and disposition of income. With regard to the withholding of taxes on the salaries of the Panamin employees, the provision of Article 2(a) of Supplement A to Title II of the National Internal Revenue Code (Withholding on Wages) specifically states that "Every employer making payment of wages shall deduct and withheld upon such wages a tax determined in accordance with a withholding tax to be prepared by the Secretary of Finance". The term "employer" as used in the afore-quoted law embraces not only individuals and organizations engaged in trade or business, but also organizations exempt from income tax, such as charitable organizations, clubs, social organizations and societies, as well as the Government of the Philippines including its agencies, instrumentalities and political subdivisions (Sec. 6, Rev. Reg. No. V-8). Wherefore, the Panamin Foundation, Inc., although appearing to be an exempt organization, is nevertheless bound to deduct and withheld the withholding tax due on the salaries of its employees. cdta Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue