BIR Ruling No. 032-13

January 22, 2013 BIR RULING NO. 032-13 Sections 27 (D) (1), 30 (C); 105 of the Tax Code, as amended; BIR Ruling No. 046-11; BIR Ruling No. 173-11 Macondray Plastics Products Foundation, Inc. 2263 Pasong Tamo Extension, Makati City Attention: Leonard R. de Ocampo Treasurer Gentlemen : This is to acknowledge receipt of your letter dated 1 August 2012 which was forwarded to our office on 22 August 2012 requesting for the issuance of a Certificate of Tax Exemption enjoyed under Section 30 (C) of the National Internal Revenue Code of 1997, as amended. It is represented that Macondray Plastics Products Foundation, Inc. with Taxpayer's Identification No. 008-267-400-000, is a non-stock, non-profit corporation duly organized under the laws of the Philippines; that it is registered with the Securities and Exchange Commission (SEC) under Registration No. CN201207319 and with SEC Certificate of Incorporation dated April 19, 2012 and that the purposes for which it was incorporated are the following: 1. To receive, acquire, manage, administer and expend property and funds for granting scholarships and other forms of educational assistance to dependent college children of regular employees of Macondray Plastics Products, Inc.,in identified educational institutions in Mindanao, in order to promote educational and manpower training programs, as well as youth and sports development; 2. To contribute to such other charitable institutions provided that the use of funds shall always adhere to the requirements of the National Internal Revenue Code and other related laws and regulations; 3. To engage in fund raising activities for the sole purpose of generating funds for scholarship subject to governmental regulations; IaEHSD 4. To receive, take title and hold, by bequest, gifts, donations and contributions; 5. To sell, convey and dispose of any such property and to invest and re-invest the principal thereof and to deal with and expend the income therefrom, for any of the above-mentioned purposes; provided that not more than 25% of said benefits, gifts, donations and contributions shall be used for the administration purposes; 6. To do such things, transact such business, exercise such powers and authority a may be directly or indirectly necessary for the accomplishment of any of the purposes or the attainment of any more of the objectives herein enumerated or which shall appear at any time conducive to the Foundation; and 7. To borrow money and to pledge, mortgage, sell or lease real and personal property for any kind necessary to promote the objectives of the foundation. In reply, please be informed that this Office cannot as yet issue the requested certificate of tax exemption because Macondray Plastics Products Foundation, Inc. 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 (C) of the Tax Code of 1997, as amended. Macondray Plastics Products Foundation, Inc. can file the necessary annual information return instead of an income tax return on or before the 15th day of the fourth month of the preceding accounting period following the start of its operation as an exempt organization as required under Section 24 of Revenue Regulations No. 2-40 dated February 10, 1940 ( Collector vs. Sinco, G.R. L-9276 dated October 23, 1956 ).Based on such information return, we shall conduct the necessary investigation on the activities undertaken during the period. The letter of exemption shall thereafter be issued depending upon the result of our investigation. (BIR Ruling No. 173-11 dated May 25, 2011) ASICDH However, Macondray Plastics Products Foundation, Inc. is subject to the corresponding internal revenue taxes imposed under the National Internal Revenue Code 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 benefits 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. (BIR Ruling No. 173-11 dated May 25, 2011) It should be understood that Macondray Plastics Products Foundation, Inc. shall be constituted as withholding agent of the government if it acts as an employer and its employee receives 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 expanded withholding tax provided for in Section 57 (B) of the Tax Code of 1997, also as implemented by Revenue Regulations No. 2-98, as amended. (BIR Ruling No. 046-11 dated February 16, 2011) 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 organizations or grantees of tax incentives shall be subject to examination by the BIR for purposes of ascertaining compliance with the conditions under which it has been granted tax exemptions or tax incentives, and its tax liabilities, if any. (BIR Ruling No. 046-11 dated February 16, 2011) SCHcaT Finally, it is subject to the payment of the annual registration fee of Php500.00 as prescribed in Section 236 (B) of the Tax Code of 1997, as amended. It is also required under Section 6 (C) in relation to Section 237 of the same Code to issue duly registered receipts or sales or commercial invoices for each sale or transfer of merchandise or for services rendered which are not directly related to the activities for which the Association is registered [Revenue Memorandum Circular (RMC) No. 76-2003]. For purposes of securing a permanent exemption after the three (3)-year period, Macondray Plastics Products Foundation, Inc. is required to submit the following documents pursuant to Revenue Memorandum Circular No. 14-2001: 1. Certified true copy of the Certificate of Registration with the SEC; 2. Certified true copy of the Articles of Incorporation which includes the following provisions: a. That the corporation is non-stock, non-profit; b. That the primary purpose for which it was created is one of those enumerated under Sec. 30 of the Tax Code of 1997, as amended; c. That no part of the net income shall inure to the benefit of any its members; d. That the trustees do not receive any compensation; and e. In case of dissolution, assets of the corporation shall be transferred to similar institution or to the government. 3. Certified true copy of the By-Laws; TaHIDS 4. Certification under oath that there has not been any change in the Articles of Incorporation and/or By-laws; 5. Certified true copy of the Annual Information Returns and Financial Statements for the last three (3) years of operation; 6. BIR Certificate of Registration. 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.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue