BIR Ruling [DA-400-99]

July 9, 1999 BIR RULING [DA-400-99] Dr. Jose P. Rizal Memorial Foundation, Inc. Medical Center Manila Rm. 244 1122 Gen. Luna St., Ermita, Manila Attention: Dr. Liborio L. Mangubat Chairman & President Gentlemen : This refers to your letter dated June 3, 1999 requesting for exemption from the payment of 20% final withholding tax on interest income and/or yield from Philippine currency bank deposits and deposit substitutes of non-stock, non-profit corporation. It is represented that Dr. Jose P. Rizal Memorial Foundation, Inc. is a non-stock, non-profit domestic corporation duly registered with the Securities and Exchange Commission on July 18, 1968 under SEC Registration No. 35807; and that the purposes for which the corporation was formed are the following: 1. To function and operate as a private science and research foundation in the field of medicine and public health in the Philippines; 2. To provided medical services, medical supplies and medical assistance and training to and for deserving and needy families and individuals of the Philippines; 3. To provide financial assistance, inducements and grants to doctors of medicine to encourage and enable them to practice their profession in the provinces and non-urban centers of the Philippines. CaTSEA 4. To establish medical centers and sanitaria and hospitals as may be advisable; 5. To organize, staff and finance research projects which may be established in furtherance of the purposes and objectives of this Foundation; 6. To promote, support and finance publication, reports prepared under the auspices of the Foundation; 7. To receive and/or give grants, gifts, legacies, donations, contributions, endowments, and financial aids or loans from any source whatsoever, whether local or foreign, and to make use of them in connection with the foregoing purposes and objectives; and 8. Generally, to do all such things transact such business, exercise such powers and authority as may be directly or indirectly necessary, suitable or proper for the accomplishment of any of the purposes or the attainment of any or more of the objects herein enumerated or which shall appear at any time conducive to, or expedient for the Foundation; it being expressly understood, however, that whatever assets that may remain at the expiration of the terms of existence or dissolution of the Foundation for any cause provided for by law, shall be conveyed and disposed of in trust to a successor foundation to be organized by members of this Foundation on the date of its dissolution, or to person, institutions, corporations, associations or entities which are then existing and are engaged in the same purposes and activities as this Foundation; and that since the purposes and essence of this Foundation, being purely humanitarian, benevolent, charitable, educational and philanthropic, it is expressly declared that this is a corporation not for gain or individual profit and that no dividend shall ever be declared or paid to any of its members, and that none of its property, real or personal, shall be used or expended except in carrying into effect the legitimate ends and aims of its being. ACTIcS In reply thereto, please be informed that your request is hereby denied for lack of legal basis. Dr. Jose P. Rizal Memorial Foundation, Inc. is exempt from the payment of income tax on income received by it as such organization, and therefore, need not file an income tax return concerning such income. However, it is subject to the corresponding internal revenue taxes imposed under the National Internal Revenue Code on its income derived from any of its properties, real or personal or any activity conducted for profit regardless of the disposition thereof, which income should be returned for taxation. Accordingly, and since interest income from currency bank deposits and yield or any other monetary benefit from deposit substitute instruments are income from personal property, said interest income are subject to the 20% final withholding tax pursuant to Section 27(D) in relation to Section 57(A) of the Tax Code of 1997. Moreover, your interest income derived under the expanded foreign currency deposit system are subject to a final withholding tax of 7 1/2% pursuant to Section 27(D)(1) in relation to Section 57(B) of the Tax Code of 1997. (BIR Ruling No. DA-562-98 dated December 9, 1998) Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)