BIR Ruling No. 003-10

April 15, 2010 BIR RULING NO. 003-10 00-000 National Kidney and Transplant Institute East Avenue Quezon City Attention: Mr. Enrique T. Ona, M.D. Executive Director Gentlemen : This refers to your letter dated August 18, 2009 stating that the National Kidney and Transplant Institute [NKTI] (formerly National Kidney Foundation of the Philippines) was created under Presidential Decree (PD) No. 1832 on January 16, 1981; that under Section 13 of PD No. 1832, the institute enjoys exemption from payment of taxes, thus: "Sec. 13. Exemption from Fees, Duties and Taxes. The Foundation is hereby declared exempt from all income and all other internal revenue taxes, tariff and customs duties and all other internal revenue taxes, fees, charges and assessments levied by the Government and its political subdivisions, agencies and instrumentalities." that as a government owned and controlled corporation, it has been receiving limited subsidy from the National Government for the care of its indigent patients; that the P185 Million subsidy that is allotted to NKTI is less than 15% of its total operating budget; that with this limited subsidy, the NKTI has been subsidizing the cost of care to its service patients from the income that it generates; that in Calendar Year 2008, qualified free service (cost of care to its charity patient) and discounts amounted to P335 Million; that this means that for every peso spent for its service patients, NKTI gave P3.8 from its earnings, while the national government's subsidy contributed to P0.61; and that the first semester financial review shows that it is now spending P0.47 for every P1.00 of quantified free service provided. HSAcaE Based on the foregoing representations, you now request, that as a government owned and controlled corporation, its allotted P185 Million subsidy shall be exempt from taxes pursuant to Section 13 of PD No. 1832. In reply thereto, please be informed that Section 13 of PD No. 1832 provides that "Sec. 13. Exemption from Fees, Duties and Taxes. The Foundation is hereby declared exempt from all income and all other internal revenue taxes, tariff and customs duties and all other internal revenue taxes, fees, charges and assessments levied by the Government and its political subdivisions, agencies and instrumentalities." Corollarily, Fiscal Incentive Review Board (FIRB) Resolution No. 014-07 "WHEREAS, there is also a need to ensure that all importations covered by this tax subsidy grant will be used exclusively by the NKTI in its operations and not for other purposes; NOW, THEREFORE, BE IT RESOLVED, AS IT IS HEREBY RESOLVED, to grant tax subsidy to the NKTI in the amount of P7,424,652.00 representing the taxes and duties on its importations of various medical, laboratory and surgical equipment and supplies [fourteen (14) shipments with billings of the Bureau of Customs (BOC) dated January 17, 2007 to October 19, 2007]: Provided, however, that all hospital supplies, materials and equipment for which tax subsidy is granted shall form part of the regular inventory of the NKTI as certified to by the resident Commission on Audit (COA) auditor of the NKTI: Provided, furthermore, that the NKTI shall undertake steps/programs to improve the ratio of its charity patients vis--vis its paying patients and submit the results of such measures/programs to the FIRB on or before June 30, 2008: Provided, finally, that the grant of such tax subsidy shall be in accordance with the terms and conditions of Section 14 of the 2007 General Appropriations Act, subject to the availability of funds therefor, pursuant to the terms and conditions of the Rules and Regulations to Implement the Tax Subsidy Provisions under Executive Order No. 93." Prescinding from the above-cited provisions vis-a-vis the FIRB Resolution, it is undisputed that NKTI indeed is EXEMPT from all taxes. Accordingly, the allotted P185 Million subsidy granted to NKTI is EXEMPT from income and all taxes. 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.) JOEL L. TAN-TORRES Commissioner of Internal Revenue