BIR Ruling [DA-249-03]

July 30, 2003 BIR RULING [DA-249-03] Rev. Regs. No. 2 Alabang Country Club, Inc. Ayala Alabang Village Muntinlupa, Metro Manila Attention: Mr. Lawrence M. Jalbuena General Manager Gentlemen : This refers to your letter dated June 3, 2003 requesting for a ruling confirming your opinion that all other income received by the Club as a non-stock, non-profit corporation which is not derived from any of its real or personal properties, or from any activity conducted for profit such as, but not limited to, transfer fees collected by the Club upon a transfer or assignment of shares or change of company-designated representative, and processing fees from processing of membership applications are not subject to income tax; and that the Club need not file an income tax return with respect to the above described income. In reply, please be informed as follows: 1) Section 30 of Revenue Regulations No. 2 provides, viz. : "Section 30. Religious, charitable, scientific, athletic, cultural, and education corporations. xxx xxx xxx The income of such corporation which is considered as income from their properties, real or personal, generally consists of income from corporate dividends, rentals received from their properties, interests received from capital loaned to other persons; income from agricultural lands owned by such corporations, profits from the sale of property, real or personal, and other similar income. Income not derived from their properties, real or personal, are exempt. For example, in the case of a religious corporation, income from the conduct of strictly religious activities, such as fees received for administering baptismals, solemnizing marriages, attending burials, holding masses, and other like income, is exempt. However, if such exempt income is invested by the corporation, the income from such investment, as interests from the capital where the capital has been loaned or dividends on stock where the capital has been invested in shares of stock, will constitute taxable income ..." In view of the foregoing, transfer and processing fees are exempt from income tax. However, if the said fees are invested by the corporation, the income from such investment is taxable. 2) Since you claim to be an exempt organization under Section 30 of the 1997 Tax Code, you are not required to file an Income Tax Return with respect to your income from transfer and processing fees. However, you are 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 (in lieu of the Income Tax Return) under oath, stating the club's gross income and expenses incurred during the preceding period and a certificate showing that there has not been any change in your By-laws, Articles of Incorporation, manner of operation and activities as well as sources and disposition of income. HESAIT It may not be amiss to mention that then Section 26(H) of the old Tax Code, referring to a "club organized and operated exclusively for pleasure, recreation, and other non-profitable purposes, no part of the net income of which inures to the benefit of any private stockholder or individual" has been deleted in the 1997 Tax Code. Accordingly, the above described clubs are no longer exempt from income tax with respect to income received by them as such. It is, therefore, advisable to reapply for an exemption from payment of income tax in order to determine whether Alabang Country Club, Inc. continues to possess the necessary requirements to exempt it from income tax. 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, Commissioner of Internal Revenue By. (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group