BIR Ruling [DA-306-04]

June 2, 2004 BIR RULING [DA-306-04] DA 196-00 Del Rosario & Del Rosario 15/F Pacific Star Building Makati Avenue corner Sen. Gil Puyat Avenue Makati City Attention: Atty. Ma. Jenny Arevalo De Villa and Atty. Joseph R. Rebano Gentlemen : This refers to your letter dated May 7, 2004 stating that your client, The Superintendent of the Norwegian Missionary Alliance (NMA) is a religious society organized as a corporation sole under the Corporation Code of the Philippines; that the main organization of the NMA is the Den Norske Misjonsallianse based in Oslo, Norway; that both the Den Norske Misjonsallianse and the NMA are organizations engaged in religious, missionary and charitable activities; that in the Philippines, the main aim of the NMA is to fulfill the mission of propagation of the Christian faith through religious and spiritual activities such as conducting evangelical services, extending financial assistance to poor families, and more especially the grant of scholarship to children of destitute families; that the organization provides the poor children in specific areas in the Philippines with spiritual and moral guidance and conducts activities that will encourage both mental and spiritual development; that since the organization's inception in the Philippines, it has been administered by a Superintendent, who is a Norwegian missionary appointed by the mother organization in Norway; that originally, the Superintendent in the Philippines was Mr. Trygve Bjorkas; that recently, a new Superintendent in the Philippines has been appointed in the person of Mr. Bjorn Erik Trongkleiv; that Mr. Trongkleiv has been the Superintendent and Project Leader/Director of NMA in the Philippines since January 1, 2003; that he is accompanied by another Norwegian missionary, Mr. Per Oyvind Olsen, who has been appointed by the mother organization in Norway as the mission's Assistant Director/Project Leader; that both Mr. Trongkleiv and Mr. Olsen are accompanied in the mission by their families; that their families are at times participants in the conduct of the mission, and also help spread the Christian values of the organization; that the Superintendent of the Norwegian Missionary Alliance and the NMA in Norway are both funded by voluntary donations of friends of the mission; that both organizations are not engaged in any business or any income generating enterprises; that the Norwegian missionaries appointed for service in the Philippines (as well as other missionaries appointed in other missions of the organization in the world) are only allowed to work within the mission and are prohibited to engage in other employment, business and income generating activities; that the Norwegian missionaries appointed to serve in the Philippines have no compensation or salary, and receive from the mother organization only a very minimal, very basic monthly support; that the basic monthly support remitted to the Norwegian missionaries in the Philippines is primarily to support their mission and to ensure that the Norwegian missionaries in the Philippines do not become a Financial liability in this country; that the mother organization guarantees the financial support and stability of the missionaries during their stay to enable them to concentrate on the mission; that the Norwegian missionaries in the Philippines have no personal salary but only a very basic monthly support through remittances of the NMA in Norway to the NMA in the Philippines; that the amount of the basic monthly support of the Norwegian missionaries in the Philippines is however variable and dependent on the availability of funds for the mission; that the basic monthly support is computed every six months and the amount varies depending on factors such as the amount of the accumulated donations, the actual expenses of all the missions worldwide and urgent needs of the mission in the Philippines vis--vis other missions in the world; and that when other missions in the world are in need of greater assistance from NMA in Norway, the Norwegian missionaries may receive a lesser monthly support from the organization. Based on the foregoing representations, you now request a ruling that the basic monthly support and other benefits received by the Norwegian missionaries are exempt from the payment of income tax and consequently from the filing of the income tax return as well as from the fringe benefit tax prescribed in Section 33(B) of the Tax Code of 1997. DCHaTc In reply thereto, please be informed that the Superintendent of the Norwegian missionaries who does not receive any fixed salary but only gifts and free-will offerings from abroad and from individuals and churches, is exempt from the payment of income tax and consequently from the filing of the corresponding income tax return. ( BIR Ruling No. 082-94 dated April 4, 1994 ) Similarly situated is BIR Ruling No. DA196-00 dated March 30, 2000, where this Office ruled that ". . . that since the financial support being received by the foreign missionaries are not compensation and/or salary but mere donations, said financial support are not, therefore subject to Philippine income tax." On the other hand, the term "fringe benefit" means any good, service or other benefit furnished or granted by an employer in cash or in kind, in addition to basic salary, to an individual employee (except rank and file employee). (see Sec. 33(B), Tax Code of 1997) It is clear that the aforesaid benefits are given to employees who are holding managerial and supervisory positions. Inasmuch as foreign missionaries are not employees in the strict sense of the law, as the financial support being received by them are not compensation or salary but mere donations, the benefits received by the Norwegian missionaries in the Philippines should therefore not be subject to the fringe benefit tax prescribed in Section 33(B) of the Tax Code of 1997. IN VIEW OF THE FOREGOING, this Office holds that the basic monthly support and other benefits received by the Norwegian missionaries are exempt, from the payment of income tax and the filing of the corresponding income tax return, as well as from the fringe benefit 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 null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group