BIR Ruling

March 28, 1973 Life Security Association, Inc. (Formerly: Legal Security Assn. Inc.) Suite 706 May Building Manila Attention: Mr . Eduardo L . Rayo President Gentlemen : This refers to your letter dated October 23, 1972, stating the following: "We are a non-profit, non-stock association organized for the purpose of helping our members avail of products and/or services of persons, firms, corporations or other business entities. The idea is to enter into contract with, say, an insurance company or say other service company, for purposes of extending their services to our members. For such services, the members are charged individually and the association pays the company rendering the services out of the contribution of the members. In most cases, the association shall retain portion of the charges levied the members to meet administrative expenses involved therein. The operation of the association is confined to its entire membership. As a non-profit association, however, no dividends are declared. It may also interest you to note that a provision in our Articles of Incorporation filed with the Securities and Exchange Commission states that in the event of dissolution or liquidation of the association, all of its disposable assets shall be turned over to an educational foundation or to the government or its political subdivision. cdta In the light of the facts heretofore presented, kindly advise us on the extent of our tax liability if any under our existing laws. We shall likewise appreciate it if we shall be advised on whether or not we are required to withhold taxes on commission we may pay our agents and our lone office personnel (in all probability, we shall need only one person to take care of office matters at the start)" In reply, I have the honor to inform you that after going over the purposes of your Amended Articles of Incorporation as stated in Article 11 thereof, your corporation is an independent contractor subject to the P50.00 annual fixed tax prescribed in Section 182(A)(1) of the Tax Code and its gross quarterly receipts is subject to the 3% tax prescribed in Section 191 of the same Code. Furthermore, you are also subject to the income and residence taxes. You are not required to withhold taxes on the commissions paid to your agents and lone office personnel. However, if your so-called agents qualify as employees, then you are obligated to withhold tax on their salaries, including the salary of the lone office personnel. aisa dc Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue