BIR Ruling [DA-152-03]

May 8, 2003 BIR RULING [DA-152-03] 30 S-30-021-2002 Aquiles J. Lopez 107 Fraternidad St. Balayan, Batangas S i r : This refers to your letter dated May 6, 2003 requesting on behalf of Maria (Marucha) Jison-Lopez de Lopez Foundation, Inc. for exemption from the payment of income tax under Section 30 of the Tax Code of 1997 and donor's tax under Section 101(A)(3) of the same Code. Documents submitted to this Office disclosed that Maria (Marucha) Jison-Lopez de Lopez Foundation, Inc. is a non-stock corporation duly registered with the Securities and Exchange Commission under SEC Registration No. 144870 dated September 30, 1987; that the main objective for which the corporation was formed is for it to promote, support and finance study grants and scholarships to poor and less affluent but deserving residents of Balayan, Batangas; and that the funds of the association is derived from gifts, donations and endowments from other persons or entities. Based on the foregoing, this Office is of the opinion and so holds that Maria (Marucha) Jison-Lopez de Lopez Foundation, Inc. falls within the purview of 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 and 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 7-1/2% 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 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 year 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. SIcCTD 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 April 15 of each year. 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 the said exempt organization shall be constituted as a withholding agent of the government if it acts as an employer and its employees receive compensation income subject to withholding tax under Section 79(A), Chapter XIII, Title II of the Tax code of 1997, as implemented by Revenue Regulations No. 2-98, or if it makes income payments to individuals or corporations subject to the expanded withholding tax pursuant to Section 57(B) of the Tax Code of 1997, also as implemented by Revenue Regulations No. 2-98. ( BIR Ruling No. S-30-064-2000 dated July 11, 2000 ) As a corporation organized and operated for social welfare purposes, donations in favor of Maria (Marucha) Jison-Lopez de Lopez Foundation, Inc. are exempt from the payment of the donor's tax pursuant to Section 101(A)(3) of the Tax Code of 1997, subject to the condition that not more than 30% of the said gifts shall be used by the donee, Maria (Marucha) Jison-Lopez de Lopez Foundation, Inc., for administration purposes. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service