BIR Ruling [DA-186-04]

April 6, 2004 BIR RULING [DA-186-04] 24; 53-98 Sixth Military District World War II Veterans Association, Inc. 48 Mission Road Ext. La Paz, Iloilo City Attention: Mr. Joaquin D. Tesoro President Gentlemen : This refers to your letter dated August 14, 2000 reiterating your request dated October 9, 1999 and November 22, 1999 for exemption from the payment of income tax on the raffle conducted by your association, the proceeds of which were given as financial assistance to destitute World War II veterans. It appears that your association planned a raffle for DONORS on March 17, 2000 at the Balantang Memorial Cemetery National Shrine in Jaro, Iloilo City; that the funds raised from the raffle were used by the association in extending financial assistance to destitute World War II, veterans and other health needs; that you printed 1,500 stubs of 22 tickets per stub, each ticket with the donated amount of P10.00; that twenty tickets accrued to the association while the remaining two were the commission of the fund solicitors; that a total of 33,000 tickets, with serial number starting at 00001 to 33,000 were printed; that at ten (P10.00) pesos per ticket, you expected P330,000.00 gross; that from this expected donation the following expenses were charged: (a) One First Prize P30,000.00 (b) One Second Prize P20,000.00 (c) One Third Prize P10,000.00 (d) Five Fourth Prizes @ P1000 P5,000.00 (e) Ten Fifth Prizes @ P500 P5,000.00 (f) Twenty consolation @ P100 P2,000.00 Total prizes to donors P72,000.00 (g) Commissions to solicitors (2 tickets per stub for 1,500 stubs @ P10 per ticket) P30,000.00 (h) Administrative Overhead and Cost of printing P48,000.00 TOTAL EXPENSES P150,000.00 NET DONATION (income) P180,000.00 and that the 6th Military District World War II Veterans Association is a non-stock, non-profit corporation registered with the Securities and Exchange Commission (SEC) under SEC Registration No. ENO93000191 dated June 17, 1993. In reply, please be informed that Section 2.57-1 of Revenue Regulations No. 2-98 implementing Section 24(A) of the Tax Code of 1997 provides that: "Sec. 2.57-1 Income Payments Subject to Final Withholding Tax The following forms of income shall be subject to final withholding tax at the rates herein specified; (A) Income payments to a citizen or to a resident alien individual ; (1) . . . prizes (except prizes amounting to ten thousand pesos (P10,000) or less which shall be subject to tax under Section 24 (A) of the Code) and other winnings (except Philippine Charity Sweepstakes winnings and Lotto winnings), derived from sources within the Philippines Twenty percent (20%)." DIESaC In view of the foregoing, the 1st and 2nd prizes which are more than P10,000.00 each, shall be subject to the 20% final withholding tax whereas the rest of the prizes amounting to P10,000.00 or less shall be subject to tax under Section 24(A) of the Tax Code of 1997. ( BIR Ruling No. 53-98 dated May 8, 1998 ) 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 as null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group