Pacis & Bernard

July 27, 2007 BIR RULING [DA-422-07] Section 30 Pacis & Bernard 94 Road 1 Project 6, Quezon City Attention: Atty. Celeste P. Bernard Gentlemen : This refers to your letter dated June 25, 2007 requesting on behalf of your client, Rodolfo and Milagros Dimayuga Memorial Foundation Inc. (the "Foundation" for brevity) for a clarificatory ruling on the returns which it is required to file on a monthly, quarterly or annual basis. As represented, the Foundation was issued exemption from payment of income tax under BIR Ruling No. S30-021-2007 dated April 20, 2007. Revenue District Office No. 43 informed you that the Foundation needs to file a monthly percentage tax return (BIR Form 2551M). However, when your accountant filed the monthly percentage tax, he was informed that since the Foundation does not have income generating activities at the moment, it is not required to file the monthly percentage tax return. In reply, please be informed that the Foundation must file its Annual Information Return in lieu of the Income Tax Return on or before the 15th day of the fourth month following the end of the accounting period. Section 105 of the Tax Code of 1997 provides that any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value-added (VAT) imposed in Sections 106 to 108 of the same Code. The phrase "in the course of trade or business" means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a non-stock, non-profit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity. SHDAEC Both the 10% VAT and 3% percentage tax are taxes on the business transaction or activity. Accordingly, if the foundation is not engaged in the sale of goods or services in the course of a business pursuit, including transactions incidental thereto, it is not liable for VAT and percentage tax. Hence, it is not required to file VAT or percentage tax returns. Likewise, if the Foundation does not have employees, it is not required to file Monthly Withholding Tax on Compensation returns. Accordingly, your remedy is to amend your registration with the BIR. 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, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service