Taguete Settlers & Homeowners Association, Inc.

June 5, 2008 BIR RULING [DA-346-08] RR 8-2005; DA-287-2008 Taguete Settlers & Homeowners Association, Inc. Sitio Taguete, Cupang Antipolo City Attention: Mr. Francisco E. Colico President Gentlemen : This refers to your letter dated May 29, 2007, as indorsed by Revenue Region No. 7, Quezon City, stating that Taguete Settlers and Homeowners Association, Inc. is a non-stock, non-profit corporation duly registered with the Home Insurance and Guaranty Corporation (HIGC) on January 12, 1998; that it was organized to construct, manage, maintain and operate adequate facilities and services for its members; and that you now in effect, request for an exemption from the withholding of taxes in connection with the refund of the excess utility payments of your association from MERALCO pursuant to Revenue Regulations (RR) No. 8-2008. EATcHD In reply, please be informed that Section 2.57.5 (B) (2) of Revenue Regulations (RR) No. 2-98, as amended by RR Nos. 3-2004 and 8-2005 is explicit 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. Taguete Settlers and Homeowners Association, Inc. is an exempt corporation organized for mutual aid association as contemplated under Section 30 (C) of the Tax Code of 1997. As such, it is exempt from the payment of income tax on income received by it as such organization (BIR Ruling No. S-30-22-2006 dated May 25, 2006) and consequently from the expanded withholding tax. Moreover, since the excess utility payments pertain to expense related to Taguete Settlers and Homeowners Association, Inc.'s primary purposes, then the refund which will be received by Taguete Settlers and Homeowners Association, Inc. is not subject to the 32% regular corporate income tax because it is an exempt corporation under Section 30 (C) of the Tax Code of 1997. In sum, the MERALCO refund to Taguete Settlers and Homeowners Association, Inc. arising from the Supreme Court case of G.R. No. 141314 dated April 9, 2003 of the excess utility payments which were incurred and paid by Taguete Settlers and Homeowners Association, Inc. as an exempt organization under Section 30 (C) of the 1997 Tax Code is exempt from the 32% (now 35%) regular corporate income tax, and consequently, from the 25% or 32% (now 35%) withholding tax imposed under RR No. 8-2005. (BIR Ruling No. DA-287-2008 dated May 12, 2008) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void. SECcAI Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service