BIR Ruling

January 23, 1974 Dr. Salvador C. Laurena, M. D. Director J. V. Pagaspas Memorial Ward Inc. Tanauan, Batangas S i r : This refers to your request for exemption of the J. V. Pagaspas Memorial Ward Inc., Tanauan, Batangas from the payment of income tax and the filing of the corresponding income tax return as well as from the payment of donors and donees gift taxes under Section 27(e), 109 and 110 of the Tax Code respectively. Investigation disclosed that the J. V. Pagaspas Memorial Ward Inc., Tanauan, Batangas (hereinafter referred to as the Corporation) was established and organized as a non-stock and non-profit corporation duly registered with the Securities and Exchange Commission; that the purpose for which the Corporation was formed is to give free medical treatment and assistance to indigent persons in the province of Batangas; that the Corporation is maintained by the donations of the late Dna. Celestina Varela consisting of P25,000 cash and various shares of stock; and that no part of its net income inures to the benefit of any private individual. In view thereof, this Office is of the opinion as it hereby holds that J. V. Pagaspas Memorial Ward Inc., Tanauan, Batangas falls within the purview of a corporation or association organized and operated exclusively for charitable purposes as contemplated under Section 27(e) of the Tax Code. Accordingly, it is exempt from the payment of income tax. It is, however, subject to income tax on income derived from any of its properties, real or personal, or from any activity conducted for profit, regardless of the disposition made of such income. If it has not earned any taxable income, it is also exempt from the filing of income tax returns. However, the corporation is required to file on or before April 15 of each year, a profit and loss statement and balance sheet with the 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. cdt Moreover, inasmuch as the Corporation is a non-profit and non-stock charitable corporation, gifts made in favor of, and received by the said corporation shall be exempt from the payment of the donor's and donee's gift taxes. However, pursuant to Section 110 of the Tax Code, the exemption from donees gift tax is subject to the condition that not more than 30% of said gifts shall be used by the donee for administration purposes. Finally, it shall be the duty of the person or persons in charge of the charitable corporation receiving the gifts "to submit within ninety days after the end of each calendar year a report to the Commissioner of Internal Revenue on the use and disposition of the gifts received during the year which shall be subject to verification by said Commissioner." (Sec. 110, Tax Code, as amended). casia Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN 1601-593-5 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."