Ramon Magsaysay Award Foundation

May 16, 2007 BIR RULING [DA-304-07] R.R. 8-2005 DA-746-2006 Ramon Magsaysay Award Foundation Ramon Magsaysay Center, 1680 Roxas Blvd., Manila Attention: Ms. Elmira L. Evangelista Finance Officer Gentlemen : This refers to your letter dated June 26, 2006 requesting for exemption from the payment of withholding taxes in connection with the refund of excess utility payments from MERALCO. It is represented that Ramon Magsaysay Award Foundation is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission under SEC Registration No. 012676 dated May 20, 1957; that the purpose or purposes for which the corporation was formed are the following, viz: "1. To honor the late Ramon Magsaysay, President of the Philippines, perpetuate his memory, and give concrete recognition and meaning to those ideals which characterized his life and the courageous service which he rendered to his country and the people of the Philippines. 2. To develop a systematic program of annual awards to be known as the Ramon Magsaysay Award for persons in the Philippines and in other countries in Asia whose activities in different fields of service and endeavor best exemplify the life and ideals of Ramon Magsaysay and his greatness of spirit, integrity and devotion to freedom. CTEacH 3. To acquire properties, real or personal, receive contributions, gifts, bequests, legacies and donations here and abroad from members and non-members who believe in the ideals of Ramon Magsaysay, engage the services of persons and firms, invest its funds, moneys, and properties in such undertakings and pursue such activities as the corporation may desire or need from time to time to carry out its purposes and objectives." that no part of the property or income of the corporation shall inure to the benefit of any member, trustee or officer; and that the members of the Board do not receive compensation or remuneration for their service to the foundation. In reply, please be informed that Section 2.57.5 (B) (2) of Revenue Regulations No. 2-98 as amended by Revenue Regulations Nos. 3-2004 and 8-2005, is explicit in its provisions that the expanded withholding tax does not apply to income payments to persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special. Ramon Magsaysay Award Foundation is an exempt corporation organized for cultural purposes as contemplated under Section 30 (E) of the Tax Code of 1997, as amended. As such, it is exempt from payment of income tax on income received by it as such organization and consequently from the expanded withholding tax. Further, since the excess utility payments pertain to expense related to Ramon Magsaysay Award Foundation registered activity, then the refund which will be received by it is not subject to the 32% regular corporate income tax because it is an exempt corporation under Section 30 (E) of the Tax Code of 1997, as amended. In sum, the MERALCO refund to Ramon Magsaysay Award Foundation arising from the Supreme Court case G.R. No. 141314 dated April 9, 2003 of the excess utility payments which were incurred and paid by it as an exempt organization under Section 30 (E) of the Tax Code of 1997, as amended, is exempt from the 32% regular corporate income tax, and consequently, from the 25% or 32% withholding tax imposed under Revenue Regulations No. 8-2005. (BIR Ruling No. DA-602-2006 dated October 10, 2006) 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. HEcaIC Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service