Withdrawal of Philippine National Red Cross' VAT Exemption Privilege by E.O. No. 93

May 21, 1998 BIR RULING NO. 064-98 24; 94-000-00-064-98 Dr. Celso O. Samson Secretary General The Philippine National Red Cross National Headquarters Bonifacio Drive Port Area, Manila S i r : In reply to your letter dated July 10, 1996 requesting for reconsideration of our BIR Ruling No. 026-96 dated February 27, 1996, please be informed that we are reiterating our opinion in the said questioned ruling. The privileges enjoyed by PNRC as provided for under Section 4(b) of Presidential Decree No. 1264 were already withdrawn by Executive No. 93 effective March 10, 1987 before the effectivity of the VAT Law (Executive Order No. 273) on January 1, 1988; hence, PNRC can no longer invoke its exemption from VAT on its importations and on its local purchases . The fact that the Expanded VAT Law (R.A. 7716) later on restored the exemption of all transactions which are exempt under special laws or international agreements to which the Philippines is a signatory is of no moment in this instant case because the Geneva Red Cross Convention, which is an international agreement to which the Philippines is a signatory, does not provide for any tax exemption in favor of any party. Therefore, despite the fact that there is an international agreement to which the Philippines is a signatory, PNRC could not still be exempt from VAT because tax exemptions are construed in strictissimi juris against the taxpayer and there should be a clear and categorical provision in the law to that effect before one can be exempt from tax. ( Catholic Church vs. Hastings, 5 Phil 70; Esso Standard Eastern, Inc. vs. Acting Commissioner of Customs, L-D1841, Oct. 28, 1966, 18 SCRA 488; Phil. Acetelyne vs. Commissioner of Internal Revenue, L-19701, Aug. 17, 1967; 20 SCRA 1056; Commissioner of Internal Revenue vs. Guerrero, L-20942, Sept. 22, 1967, 21 SCRA 180; Manila Electric Co. vs. Vera, L-29987, Oct. 22, 1975, 67 SCRA 351) prLL However, local and foreign donations, which include donations for disaster relief work and other Philippine Red Cross services, shall be exempt from the donor's tax pursuant to then Section 94 of the Tax Code, as amended (now Sec. 101 of the Tax Code of 1997), provided that not more than 30% of said donations shall be used by PNRC for administration purposes. Furthermore, being a non-profit and charitable organization, PNRC is exempt from income tax on income received by it as such organization pursuant to Section 26(g) of the Tax Code, as amended (now Sec. 30(E) of the Tax Code of 1997). But income of whatever kind or character derived by PNRC from its properties, real or personal, or from any of its activities conducted for profit regardless of the disposition made of such income shall be subject to income tax. Thus, interest income derived by PNRC from currency bank deposits and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements shall be subject to the 20% final tax pursuant to then Section 24(e) of the Tax Code, as amended (now Sec. 27(D)(1) of the Tax Code of 1997). LexLib Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue