BIR Ruling [DA-456-05]

November 10, 2005 BIR RULING [DA-456-05] Christian Era Broadcasting Service, Inc .(DZEM) 887 EDSA, Maligaya Bldg. II West Triangle, Quezon City Attention: Ernesto V. Suratos Member Board of Trustee Gentlemen : This refers to your letter dated September 20, 2005, requesting exemption from taxes on contributions and donations you received from your members, on importation of equipments and materials abroad for its operations and other taxes. It is represented that CHRISTIAN ERA BROADCASTING SERVICE, INC. (DZEM) is a duly registered non-stock, non-profit corporation with the Securities and Exchange Commission (SEC) with SEC Registration No. ANO91-195080 on August 27, 1991; that it is engaged in the operation and maintenance of a radio and telecommunications system devoted to religious programming, radio ministry, evangelical broadcasting, and biblical expositions for the propagation of the Christian faith and doctrines; and to set up necessary and auxiliary radio and telecom systems anywhere within the Philippines pursuant to and in accordance with existing laws and regulations duly promulgated by the proper governmental agency concerned; that the concept of on-going operations of your corporation is as follows, to quote: "1. Maintained exclusively by contributions and donations from Iglesia ni Cristo members; 2. No airtime fees collected from any person; 3. No shares of capital stock; 4. No dividends declared or paid to any of its members, none of its property, real or personal are used or extended except in carrying out into effect the legitimate ends of its being." Based on the foregoing, this Office is of the opinion and so holds that CHRISTIAN ERA BROADCASTING SERVICE, INC. (DZEM) is a corporation organized as contemplated under Section 30 (E) of the Tax Code of 1997. Accordingly, it 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 Tax Code of 1997 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. Likewise, interest income from currency bank deposits and yield or any other monetary benefit from deposit substitute instruments and from trust funds and similar arrangements, and royalties derived from sources within the Philippines are subject to the 20% final withholding tax: provided, however, that interest income derived by it from a depository bank under the expanded foreign currency deposit system shall be subject to 7 1/2% final withholding tax pursuant to Section 27 (D) (1) in relation to Section 57 (A), both of the Tax Code of 1997. Moreover, it is required to 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 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. CcAESI It is requested that a copy of this letter of exemption be attached to the annual information return which your corporation will file on or before the 15th day of the fourth month off each year. Under Section 235 of the Tax Code of 1997, any provision of existing general and special law to the contrary notwithstanding, the books of accounts and other pertinent records of tax-exempt organization or grantees of tax incentives shall be subject to examination by the BIR for purposes of ascertaining compliance with the conditions under which they have been granted tax exemptions or tax incentives, and their tax liabilities, if any. It should be understood that the said exempt organization shall be constituted as a withholding agent for the government if it acts as an employer and its employees receive compensation income subject to the withholding tax under Section 79 (A), Chapter XIII, Title II of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98, as amended or if it makes income payments to individuals or corporations subject to the withholding tax under Revenue Regulations No. 2-98, as amended. ( BIR Ruling No. DA-30-79-98 dated December 29, 1998 ) 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service