BIR Ruling No. 031-10

August 24, 2010 BIR RULING NO. 031-10 Section 30 (E); S-30-023-99 dated March 15, 1999; S-30-047-2001 dated June 5, 2001; S-30-02-2003 dated November 21, 2003 Roman Catholic Church, Diocese of Naval, Inc. Diocesan Chancery, Cathedral Compound 6543 Naval Biliran Attention: Rev. Filomeno G. Bactol, D.D. Bishop of Naval Gentlemen : This refers to your letter dated September 3, 2008 of requesting for exemption under Section 30 of the Tax Code of 1997, as amended. aSITDC Documentary evidence submitted disclosed that Roman Catholic Church, Diocese of Naval, Inc. is a corporation sole duly established and existing under Philippine Laws, registered with the Securities and Exchange Commission (SEC) under SEC Registration No. CN200729773 dated September 6, 2007 with Taxpayer Identification Number (TIN) 264-702-668-000; and that as Bishop of Roman Catholic Church, Diocese of Naval, Inc. , Most Rev. Filomeno G. Bactol, D.D. is charged with the administration of the temporalities and the management of the affairs, estates and properties of the Roman Catholic Church, Diocese of Naval, Inc. ; that under its Amended Articles of Incorporation, "(6) That the primary purpose for which it was created is one of those enumerated under section 30 of the Tax Code of 1997; (7) That no part of the net income shall inure to the benefit of any of its members; (8) That the officers and members do not receive any compensation; and (9) That in case of dissolution, the assets of the Organization/Corporation/Association shall be transferred to a similar institution or to the government." In reply, please be informed that this Office cannot yet issue the requested ruling/certificate of tax exemption. It has to prove by actual operation for at least three (3) years that it is really an organization/association exempt from income tax under Section 30 of the Tax Code of 1997, as amended. It shall file the necessary annual information return instead of an income tax return on or before April 15 of each year following the start of its operation as an exempt organization as required under Section 24 of Revenue Regulations No. 2. Based on such information return, the BIR Revenue District Office which has jurisdiction over Roman Catholic Church, Diocese of Naval, Inc. shall conduct the necessary investigation on its activities undertaken during the period. The letter of exemption shall thereafter be issued depending upon the result of our investigation. However, Roman Catholic Church, Diocese of Naval, Inc. shall be subject to the corresponding internal revenue taxes imposed under the Tax Code of 1997, as amended, on income derived from any of its properties, real or personal, or 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 instruments and from trust funds and similar arrangements, and royalties derived from sources within the Philippines are subject to 20% final withholding tax; provided, however, that the interest income it derives from a depository bank under the expanded foreign currency deposit system shall be subject to a final withholding tax of 7 1/2% pursuant to Section 27 (D) (1) in relation to Section 57 (A) of the Tax Code of 1997, as amended. Moreover, as a non-stock and non-profit exempt entity, Roman Catholic Church, Diocese of Naval, Inc. is required to file on or before the 15th day of the fourth month following the end of the cooperative's accounting period a Profit and Loss Statement and Balance Sheet with 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. It should be understood that Roman Catholic Church, Diocese of Naval, Inc. shall be constituted as a withholding agent for the government if it acts as an employer and any of its employees receives compensation income subject to withholding tax, or if it makes payments to individuals or corporations subject to the withholding tax provided for in Section 57 of the Tax Code of 1997, as amended. SDHAEC Finally, Roman Catholic Church, Diocese of Naval, Inc.'s books of accounts and other pertinent records shall be subject to periodic examination by revenue enforcement officers of this Bureau for the purpose of ascertaining whether it has complied the conditions under which it may be granted tax exemption or tax incentives and/or has paid its tax liability, if any, pursuant to Section 235 of the Tax Code of 1997, as amended. For purposes of securing a permanent exemption after the three (3)-year period, you are required to submit the following documents pursuant to Revenue Memorandum Circular (RMC) 14-2001: 1) SEC Registration; 2) Annual Information Returns for the past three (3) years; and 3) Financial Statements covering the latest three (3) years. This ruling is being issued on the basis of the foregoing facts as presented. 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.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue