BIR Ruling [DA-284-96]

July 30, 1996 BIR RULING [DA-284-96] Diaz Murillo Dalupan 5/F Don Jacinto Building Dela Rosa corner Salcedo Sts. Legaspi Village, Makati City Attention: Mr . Alberto V . Igrubay/Moises R . Villanueva for Simbahang Universal Pamayanan Ng Banal Na Espiritu, Inc. Gentlemen : This refers to your request in behalf of your client, Simbahang Unibersal Pamayanan Ng Banal Na Espiritu, Inc. (SUPBEI) for exemption from the payment of income tax and the filing of the corresponding income tax return under Section 26 of the Tax Code, as amended, and as a donee institution under Batas Pambansa Blg. 45. cdta Documentary evidence submitted to this Office disclosed that the SUPBEI is a non-stock, non-profit religious corporation duly registered with the Securities and Exchange Commission under SEC. Reg. No. ANO95-04226 dated November 14, 1995; that the purpose for which the corporation is formed is for the administration of its affairs, properties and temporalities; that the members of the Board of Directors/Trustees do not receive compensation or fixed remuneration; and that no part of its net income will inure to the benefit of any member. In reply, please be informed that this Office cannot as yet issue the requested ruling/certificate of tax exemption. SUPBEI has to prove by actual operation for at least three (3) years that it is really an organization/association exempt from income tax under Sec. 26 of the Tax Code. It can file the necessary annual information return instead of an income tax return on or before April 15 of the year following the start of its operation as an exempt organization as required under Section 24 of Revenue Regulations No. 2 (Collector vs. Sinco, G.R. L-9276 dated October 23, 1956). Based on such information return, we shall conduct the necessary investigation on the activities undertaken during the period. The determination letter of exemption shall thereafter be issued depending upon the result of our investigation. Furthermore, as a corporation organized and operated for religious purposes, donations in favor of the SUPBEI are exempt from the payment of donor's tax pursuant to Section 94(a)(3) of the Tax Code, as amended, subject to the condition that not more than 30% of the said gifts shall be used by the donee, SUPBEI, for administration purposes. On the otherhand, Section 29(h)(2)(C) of the Tax Code, as amended by Batas Pambansa Blg. 45, as implemented by BIR-NEDA Regulations No. 1-81, as amended by Revenue Regulations Nos. 1-82 and 10-82 provides that donations to a private foundation which means a non-profit domestic corporation or association organized and operated exclusively for scientific; research, educational, character building and youth and sports development, health, social welfare, cultural or charitable purposes or a combination thereof, no part of the net income of which inures to the benefit of any private individual shall be deductible in full from the taxable business income of the donor. Under Section 29 of the Tax Code as amended by Republic Act No. 7496 (An Act Adopting the Simplified Net Income Taxation Scheme [SNITS] for the Self-Employed and Professionals Engaged in the Practice of Their Profession), and as implemented by Revenue Regulations No. 2-93, effective July 28, 1992 individuals engaged in business or practice of profession shall only be allowed as deduction from gross income, among others, contributions made to the Government and accredited relief organizations for the rehabilitation of calamity-stricken areas declared by the President . Pure compensation income earners are allowed to deduct from their gross compensation income only their personal and additional exemptions. (Sec. 29, Tax Code) Such being the case, this Office is of the opinion as it hereby holds that for income tax purposes, charitable and other contributions in favor of SUPBEI by individual donors/contributors shall not be deductible from their gross income; and that since SUPBEI is non-stock, non-profit domestic corporation organized and operated for religious purposes, contributions and donations to it by corporate donors shall be deductible in an amount not exceeding 3% of their taxable business income pursuant to Section 29(h)(l) of the Tax Code, as amended. It should be understood that the said exempt organization/foundation shall be constituted as withholding agent for the government if it acts as an employer and its employees received compensation income subject to the withholding tax under Section 72 (a), Chapter 10, Title II of the NIRC as implemented by Revenue Regulations No. 6-82 as amended, or if it makes income payments to individuals or corporations subject to the expanded withholding tax pursuant to Section 50 (b) of the NIRC, as amended, and as implemented by Revenue Regulations No. 6-85, as amended. It is requested that a copy of this letter of exemption be attached to the annual information return which you will file on or before April 15 of each year. 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. (BIR Ruling No. 517-A-93 dated December 23, 1993). cdtech Very truly yours, ALICIA L. TOMACRUZ Head Revenue Executive Asst. Director II, Legal Service