BIR Ruling [DA-546-06]

September 13, 2006 BIR RULING [DA-546-06] BIR Ruling No. DA-390-06 Mother Provincial of the Daughters of Mary Help of Christians, Inc . 3507 V. Mapa Extension Sta. Mesa, Manila Attention: Sr. Ma. Elizabeth Marquez, FMA Provincial Economer/Administrator Madames : This refers to your letter dated August 31, 2006 requesting for a ruling that the Manila Electric Company (MERALCO) refund to the corporation is not subject to the twenty-five percent (25%) creditable withholding tax. Documents show that Mother Provincial of the Daughters of Mary Help of Christians, Inc. (formerly, Daughters of Mary Help of Christians, Inc.) was incorporated in the Philippines on April 129, 1959 as a religious corporation sole registered with the Securities and Exchange Commission (SEC) under SEC Registration No. 15298 issued on December 21, 1984. It is a religious congregation of the Roman Catholic Church charged to administer the temporalities and the management of the estate and properties of the religious congregation in the Philippines. Further, it was organized for the following purposes: a. To carry out the consecration-mission of the Institute to the charism and spirit of St. Mary Mazzarello, in the salvific mission of the Church; b. To dedicate themselves to the integral education of young people specially the poorest and the most abandoned, according to the spirit of preventive system; c. To dedicate themselves also to adults, in particular environmental situations, for evangelization of basic human advancement; d. To establish oratory-youth centers and mission centers; e. To accept gifts, donations, bequests and devises from any benevolent natural and/or artificial persons subject to the provisions of Act No. 4075, entitled, "An Act Regulating the Practice of Soliciting and Receiving Contributions" and to expend, devote and apply such gifts, donations, bequest and devises for the overall welfare, improvement and development of all persons requesting or otherwise showing need of assistance or support from the Institute, particularly the needy, the most abandoned and the youth requiring education; cTADCH f. To acquire, own and hold real, personal and mixed estates, and improve, develop, sell, convey, encumber, lease, exchange, or otherwise dispose of the same in any manner not prohibited by existing laws; and g. To solicit and obtain loan or loans from any person, bank or banking institutions within or outside the Philippines, and if so required, mortgage, pledge, or otherwise sell or dispose any or all the properties of the Corporation;" On July 5, 2004, the BIR issued RDA-RR No. 6 Ruling No. 20-04 exempting it from income tax under Section 30 of the Tax Code of 1997. In reply, please be informed that your case is similar to the case in BIR Ruling No. DA-390-2006 dated June 23, 2006. The facts of the case are as follows: LSHA is a non-stock, non-profit corporation. It has a refund of the excess utility payments with MERALCO covering the period 1995 to 2003. It is not engaged in any profitable activities that would result in the imposition of income taxes, consequently, it has not claimed the above utility payments as deductions for income tax purposes. It is not subject to income tax, thus, it has not claimed the utility payments as deductions resulting in a benefit. This Office ruled in said case that ". . . considering that LSHA is an organization exempt from income tax and it has not been engaged in any profitable activities that would result in the imposition of taxes, thereby it has not claimed the above utility payments as deductions for income tax purposes, the refund of the excess utility payments in its favor, therefore, will not give rise to or create a taxable income. Consequently, said refund is not subject to the withholding tax prescribed under RR No. 8-2005 ." Since the refund of the excess utility payments in favor of Mother Provincial of the Daughters of Mary Help of Christians, Inc. will not give rise to or create a taxable income, the refund of the excess utility payments with MERALCO is not subject to the withholding tax. 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 as null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service