Income of OWWA Derived from All Sources Within and Without the Philippines, Subject to Tax

May 21, 1998 BIR RULING NO. 070-98 24 (c), 28 (b) (8) (B) 000-00 070-98 Overseas Workers Administration Department of Labor and Employment OWWA Building Victoria and Solana Sts. Intramuros, Manila Attention: Mr . Wilhelm D . Soriano Administrator Gentlemen : This refers to your letter dated August 21, 1997 forwarded to us by Ms. Corazon R. Gamallo of the Department of Finance on September 10, 1997 requesting for our opinion on the following: 1. Whether or not OWWA is covered by the inherent limitation on taxation that government agencies/entities are exempt from the payment of taxes; and 2. If in the affirmative, what is the scope of such exemption (whether direct or indirect, national and local taxes, etc.). It is represented that the Overseas Workers Welfare Administration (OWWA) is a government entity created under Presidential Decree No. 1694, as amended by PD No. 1809; that it manages the Welfare Fund (Welfund), which is a trust fund taken from the contributions of employers and workers specifically for the purpose of providing protection and promoting the welfare of overseas Filipino workers and their beneficiaries; that to enable the effective and continued delivery of this mandate, the OWWA is also tasked to manage and safeguard the Welfund effectively and efficiently; that the Department of Finance, in its letter-opinion dated July 10, 1991, has ruled that "while the status of OWWA as a GOCC has not been fully established, there is reasonable ground to conclude that OWWA is a quasi-corporation and as such, may be treated as a GOCC"; that on the other hand, the Government Corporate Counsel stated in its Opinion No. 196 dated October 30, 1992 that "OWWA is not a government-owned or -controlled corporation as it lacks certain essential elements which are conditions sine qua non for it to be classified as such." It is your opinion, however, that though stated differently, the aforesaid opinions/rulings lead to the conclusion that OWWA is a quasi-corporation. Hence, this request. In reply, please be informed that then Section 28(b)(8)(B) of the Tax Code, as amended, (now Sec. 32(B)(7)(b) of the Tax Code of 1997) provides that only income derived from any public utility or from the exercise of any ESSENTIAL GOVERNMENT FUNCTION accruing to the Government of the Philippines or to any political subdivision thereof shall be excluded from the income of the said entity. LexLib On the other hand, then Sec. 24(c) of the same Code (now Sec. 27(C) of the Tax Code of 1997) provides as follows: "(c) Government-owned or -controlled corporations, agencies or instrumentalities . The provisions of existing special or general laws to the contrary notwithstanding, all corporate taxpayers not specifically exempt under Sec. 26 of this Code shall pay the rates provided in this Section. All corporations, agencies , or instrumentalities owned or controlled by the Government, . . ., shall pay such rate of tax upon their taxable income as are imposed by this Section upon associations or corporations engaged in a similar business, industry, or activity." Accordingly, and considering that as represented, OWWA is a quasi-corporation specially created to manage the Welfund for the purpose of providing protection and promoting the welfare of overseas Filipino workers and their beneficiaries, it is the opinion of this Office that the taxable income of OWWA derived from all sources within and without the Philippines shall be subject to the tax imposed upon associations or corporations engaged in a similar business, industry or activity under then Sec. 24 of the Tax Code as amended (now Sec. 27(C) of the Tax Code of 1977). Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue