BIR Ruling [DA-006-02]

January 17, 2002 BIR RULING [DA-006-02] 30 (G) 083-2001 Lingap Para Sa Kalusugan ng Sambayanan, Inc., (LIKAS) 2/F Garcia Bldg., San Juan Irosin, Sorsogon Attention: Ms. Florencia C. Dorotan Executive Director Gentlemen : This refers to your letter dated January 14, 1999 requesting for exemption from the payment of income tax and the filing of the corresponding income tax return under Section 30 of the Tax Code of 1997, for registration as a donee institution pursuant to the provision of Section 34(H)(2)(c), also of the Tax Code of 1997, as implemented by Revenue Regulations 13-98 and to use "loose forms" for bookkeeping and accounting purposes. Documentary evidence submitted to this Office disclosed that the Lingap Para Sa Kalusugan ng Sambayanan, Inc. (LIKAS) is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission on November 9, 1992 under SEC Registration No. AN092-04539; that the primary purposes for which the corporation was formed is to undertake community service, by facilitating the formation of persons, who, following the teachings and example of Christ, will devote their lives to the service of their fellowmen and through the promotion of justice, service, especially those who are in need of help-the poor and the powerless; that the members of the Board of Trustees shall not receive compensation or fixed remuneration as member of such Board; that no part of the net income of the corporation shall inure to the benefit of any private person and not less than seventy percent (70%) of the total funds of the corporation will be used for the projects and purpose for which the corporation was formed and not more than thirty percent (30%) of the funds of the corporation will be utilized for administrative expenses; and that in case of dissolution of the corporation, the assets or properties of the corporation shall be donated or given to other non-stock, non-profit corporation with similar objectives, or if there is no such corporation, to any non-stock, non-profit corporation. Based on the foregoing, this Office is of the opinion and so holds that Lingap Para Sa Kalusugan ng Sambayanan, Inc. (LIKAS) is a corporation organized for social welfare purposes as contemplated under Section 30(G) of the Tax Code of 1997. Accordingly, it is exempt from the payment of income tax on income received by it as such organization, and therefore, need not file an income tax return concerning such income. However, it is subject to the corresponding internal revenue taxes imposed under the Tax Code of 1997 on its income derived from any of its properties, real or personal, or any activity conducted for profit regardless of the disposition thereof, which income should be returned for taxation. Likewise, interest income from currency bank deposits yield or any other monetary benefit from deposit substitute instruments and from trust funds and similar arrangements, and royalties derived from sources within the Philippines are subject to the 20% final withholding tax: provided, however, that interest income derived by it from a depository bank under the expanded foreign currency deposit system shall be subject to 7 % final withholding tax pursuant to Section 27(D)(1) in relation to Section 57(A), both of the Tax Code of 1997. Moreover, it is required to file on or before the 15th day of the fourth month following the end of the accounting period 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 period and a certificate showing that there has not been any change in its By-laws, Articles of Incorporation, manner of operation and activities as well as sources and disposition of income. It is requested that a copy of this letter of exemption be attached to the annual information return which your corporation will file on or before the 15th day of the fourth month following the end of the accounting period of the taxpayer. Under Section 235 of the Tax Code of 1997, any provision of existing general and special law to the contrary notwithstanding, the books of accounts and other pertinent records of tax-exempt organization or grantees of tax incentives shall be subject to examination by the BIR for purposes of ascertaining compliance with the conditions under which they have been granted tax exemptions or tax incentives, and their tax liabilities, if any. It should be understood that Lingap Para Sa Kalusugan ng Sambayanan, Inc. (LIKAS) shall be constituted as a withholding agent for the government if it acts as an employer and any of its employee receives compensation income subject to withholding under Section 79(A), Chapter XIII, Title II of the Tax Code of 1997, as implemented by Revenue Regulations 2-98 or if it makes income payments to individuals or corporations subject to the withholding tax provided for in Section 57 of the Tax Code of 1997, also as implemented (BIR Ruling No. S-30-083-2001 dated November 06, 2001) With regard to your request for registration as a donee institution, in order that donations made to the corporation for social welfare purposes, by natural and juridical person may be treated as fully deductible expense on the part of the donors, you must first secure an accreditation as a donee institution from the Philippine Council for NGO Certification (PCNC), 4/F 4718 Eduque St., Makati City, before this Office can act on your request. As to your use of "loose forms" for Bookkeeping and accounting procedure purposes you may ask permission from the Revenue District Office which has jurisdiction where the principal office of your Foundation is located. 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 considered null and void. Very truly yours, (SGD.) MILAGROS V. REGALADO Acting Assistant Commissioner Legal Service