BIR Ruling [DA-411-03]

November 13, 2003 BIR RULING [DA-411-03] Section 30 BIR Ruling No. DA-209-97 Atty. Cita Borromeo-Garcia St. Therese Compound, Villamor Airbase Pasay City M a d a m : This refers to your letter dated July 24, 2003 requesting in effect for a ruling on the following: (1) Whether there is a circular requiring all foundations or non-stock, non-profit corporations claiming to be exempt from income tax to secure a certification of tax exemption from this Office; (2) Whether the Philippine Legislator's Committee on Population and Development Foundation (PLCPD) has taken the initiative to comply with the said BIR requirement; and (3) Whether PLCPD as well as other foundations and non-stock, non-profit corporations are mandated to file or make a report on their annual income regardless of whether they are exempt from income tax payment or not. In reply, please be informed that in order to establish exemption and thus be relieved of the duty of filing returns of income and paying the tax, it is necessary that every organization claiming exemption under Section 30 of the Tax Code of 1997 shall file with the Commissioner of Internal Revenue a copy of its Certificate of Registration with the Securities and Exchange Commission (SEC); Articles of Incorporation which must include the following provisions: 1) that the corporation is non-stock, non-profit; 2) that the primary purpose for which it was created is one of those enumerated under Section 30 of the Tax Code of 1997; 3) that no part of the net income shall inure to the benefit of any of its members; 4) that the trustees do not receive any compensation; and 5) in case of dissolution, assets of the corporation shall be transferred to similar institution or to the government; By-laws; and the organization's annual information returns and financial statements for the last three (3) years showing the assets, liabilities, receipts, and disbursements of the organization, unless it is newly incorporated (Revenue Memorandum Circular No. 14-2001). IASTDE Upon receipt of the letter requesting for tax exemption and other papers by the Commissioner of Internal Revenue, the organization will be informed whether or not it is exempt. When an organization has established its right to exemption, it need not thereafter make a return of income as required under Section 46 of the old Tax Code (now Section 52(A) of the Tax Code of 1997). However, the organization should file on or before the 15th day of the fourth month following the end of the accounting period a Profit and Loss Statement and Balance Sheet with the Annual Information Return (in lieu of the Income Tax Return) under oath, stating its gross income and expenses incurred during the preceding period and a certificate showing that there has not been any change in its By-laws, Articles of Incorporation, manner of operation and activities as well as sources and disposition of income. (Section 24, Revenue Regulations No. 2). For purposes of ascertaining compliance with the conditions under which tax-exempt organization or grantees of tax incentives have been granted tax exemptions or tax incentives, and their tax liabilities, if any, the books of accounts and other pertinent records of said organizations shall be subject to examination by the BIR pursuant to Section 235 of the Tax Code of 1997 (formerly, Section 324 of the old Tax Code and Revenue Memorandum Circular No. 89-78). Finally, this Office has no record of the Philippine Legislator's Committee on Population and Development Foundation (PLCPD). In other words, PLCPD is not registered with this Office nor has it been issued a certificate of tax exemption. However, we do not discount the possibility that PLCPD may have applied for tax exemption with the Revenue District Office where its principal office is located since the function to issue such ruling has been devolved to the Regional Directors under Revenue Memorandum Circular No. 3-2001. Please be guided accordingly. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group