BIR Ruling [DA-196-06]

March 28, 2006 BIR RULING [DA-196-06] 30 (E); DA-377-05 V.C. Mamalateo & Associates Unit 6C, 20 Lansbergh Place 170 T. Morato Avenue Quezon City Attention: Atty. Nigel T. Avila Corporate Secretary Gentlemen : This refers to your letter dated January 31, 2006 stating that your client, Venture for Fund Raising Foundation, Inc. (VRFI), is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. A1999-02292 dated February 19, 1999; that its main objective is to foster and promote, by using the medium of education and by providing focus, direction and impetus to studies, scientific research, analysis, publications of findings on fund-raising and philanthropic concerns; to provide capability building, training, and technical assistance and other educational activities on fund-raising and philanthropic knowledge, to conduct scientific research, organizes conferences, seminars and other educational activities to further the knowledge on fund-raising and philanthropic activities; and to link and work with other national, regional or international organizations devoted to the same goal; and that no part of the income which the organization may obtain as an incident to its operation is distributed to its members, trustees or officers; and that on November 27, 2001, the BIR issued a tax exemption ruling in favor of VRFI clearly stating that the income derived by the said corporation is exempt from income tax and need not file an income tax return concerning such income. In connection therewith, you now request for confirmation of your opinion that income payments made to a tax-exempt corporation under Section 30(E) of the Tax Code of 1997, as amended, is not subject to creditable withholding tax. In reply thereto, please be informed that Section 2.57.5(B)(3) of Revenue Regulations No. 2-98, as amended provides that "Sec. 2.57.5 Exemption from withholding The withholding of creditable withholding tax prescribed in these regulations shall not apply to income payment made to the following: (A) National government and its instrumentalities, including provincial, city or municipal governments; (B) Persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special, such as but not limited to the following: (1) Sales of real property by a corporation which is registered with and certified by the Housing and Land Use Regulatory Board (HLURB) or HUDCC as engaged in socialized housing project where the selling price of the house and lot or only the lot does not exceed one hundred eighty thousand pesos (P180,000) in Metro Manila and other highly urbanized areas and one hundred fifty thousand pesos (P150,000) in other areas or such adjusted amount of selling price for socialized housing as may later be determined and adopted by the HLURB, as provided under Republic Act No. 7279 and its implementing regulations; SCIacA (2) Corporation registered with the Board of Investments and enjoying exemption from income tax provided by Republic Act No. 7916 and the Omnibus Investment Code of 1987; (3) Corporations which are exempt from income tax under Section 30 of the NIRC, to wit: the Government Service Insurance System (GSIS), the Social Security System (SSS), the Philippine Health Insurance Corporation (PHIC), the Philippine Charity Sweepstakes Office (PCSO) and the Philippine Amusement Gaming Corporation (PAGCOR). However, the income payment arising from any activity which is conducted for profit or income derived from real or personal property shall be subject to a withholding tax as prescribed in these regulations. Prescinding from the above-cited regulations, there is no dispute that the withholding tax shall not apply to income payments made to non-stock, non-profit corporations mentioned in Section 30 of the Tax Code of 1997, since the corporations mentioned therein are exempt from income tax and consequently from withholding tax. Similarly situated is BIR Ruling No. DA337-05 dated August 1, 2005 , where this Office ruled that ". . . Accordingly, the fees or dues which it held in trust and used solely for administration expenses of the association shall likewise be exempt from income tax and consequently from withholding tax." SUCH BEING THE CASE, this Office holds that payments made to VRFI, a non-stock, non-profit corporation, is exempt from income tax and consequently from withholding tax pursuant to Section 2.57.5(B)(3) of Revenue Regulations No. 2-98, as amended. 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service