BIR Ruling [DA-457-05]

November 10, 2005 BIR RULING [DA-457-05] F.Y. Manalo Medical Foundation, Inc. (formerly New Era General Hospital, Inc.) Commonwealth Avenue, Diliman Quezon City Attention: Ms. Josefina S. Aquilar Treasurer Gentlemen : This refers to your letter dated September 14, 2005, requesting Certificate of Tax Exemption on the contributions and donations you received from your members, on taxes due on importation of equipments and materials abroad for its operations and other taxes. It is represented that F.Y. MANALO MEDICAL FOUNDATION, INC. (formerly New Era General Hospital, Inc.) is a duly registered non-stock, non-profit charitable corporation engaged in the establishment and operation of a medical and dental foundation for the purpose of providing free services to all Iglesia ni Cristo (Church of Christ) Ministers, Evangelists, Church workers and their dependents; that the concept of the 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 shares of capital stock; 3. No dividends declared or paid to any of its members and none of its property, real or personal are used or expended except in carrying out into effect the legitimate ends of its being; 4. The level of administrative expenses do not exceed thirty percent (30%) of the total expenses for the taxable year." that it is registered with the Securities and Exchange Commission (SEC) with SEC Registration No. ANO93-002414 as New Era General Hospital, Inc. (now F.Y. MANALO MEDICAL FOUNDATION, INC.) on May 11, 1994; that it is a private, non-stock, non-profit, non-political, non-sectarian Foundation formed, established and organized to promote, support, encourage, develop, assist, and finance the activities, programs and/or projects to the pursuit and achievement of the specific purposes/objectives for which the Foundation was organized as set forth in the Amended Articles of Incorporation and that no portion of its funds and income shall inure to the benefit of any of its members. Based on the foregoing, this Office is of the opinion and so holds that F.Y. MANALO MEDICAL FOUNDATION, INC. 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. aDECHI 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 of 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-S-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