BIR Ruling [DA-153-04]

March 31, 2004 BIR RULING [DA-153-04] P.D. 1264; 014-99 The Philippine National Red Cross (P N R C) National Headquarters Bonifacio Drive, Port Area Attention: Gov. Jose G. Puyat Chairman, Finance Committee Board of Governors Gentlemen : This refers to your letter dated December 9, 2003 requesting for a ruling that rentals paid by Energizer Phils. Inc. (EPI) to Philippine National Red Cross (PNRC) be exempt from payment of withholding tax. It is represented that PNRC is a non-stock corporation and a charitable organization duly organized and existing under and by virtue of the laws of the Philippines with office address at National Headquarters, Bonifacio Drive, Port Area, Manila; that EPI, is also a corporation duly organized and existing under and by virtue of the laws of the Philippines, with principal office at EDSA, Mandaluyong City; that on December 29, 1975, EPI, then known as Union Carbide Philippines, Inc., donated to PNRC a parcel of land subject to Lease Agreement situated in Mandaluyong City covered by TCT No. 491574 consisting of 18,907 square meters, more or less; that on December 29, 1975, EPI and PNRC entered into a Contract of Lease whereby PNRC leased back the Leased Land to EPI for an initial period of 25 years commencing on May 26, 1975, and renewable thereafter for a period of up to 25 years upon mutual agreement of the parties; that under its charter, R.A. No. 95, as amended by R.A. No. 855 and R.A. No. 6373 and further amended by P.D. 1264 and P.D. 1643, PNRC was granted tax exemption privileges; that the exemption of PNRC from payment of income tax including bank interest and VAT was anchored in some previous BIR Rulings; and that PNRC's fund raising proceeds includes income derived from its donated properties which are appropriated in furtherance of its purpose as set forth in its charter particularly for the implementation of its service programs like disaster relief work, blood program, nursing service, safety and social services and Red Cross Youth Assistance. In reply, please be informed that Section 4 of Presidential Decree No. 1264 otherwise known as " An Act to Incorporate the Philippine National Red Cross " provides in part as follows: "SEC. 4. In furtherance of the purposes mentioned in the preceding sub-paragraphs, the Philippine National Red Cross shall: "a. . . . "b. Be exempt from payment of all duties, taxes, fees, and other charges of all kinds on all importations and purchases for its exclusive use, on donations for its disaster relief work and other Red Cross services; and in its benefits and fund raising drives all provisions of law to the contrary notwithstanding. "c. . . . ." the aforementioned tax exemption privileges of PNRC has not even been withdrawn by Executive Order No. 93 effective March 10, 1987, because the withdrawal of all tax and duty incentives granted to private entities refers only to those which are engaged in trade or business or an economic activity, hence, does not apply to PNRC which is a non-profit and charitable organization. Hence, rental payments to PNRC by EPI is not subject to withholding tax pursuant to Section 4 of P.D. No. 1264. (BIR Ruling No. 014-99 dated February 01, 1999) AHCTEa 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 be considered null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group