BIR Ruling No. 087-10

October 6, 2010 BIR RULING NO. 087-10 Sec. 30 (E) of the Tax Code of 1997; BIR Ruling No. DA-471-98; BIR Ruling No. S-30-008-03; BIR Ruling No. S-30-100-00; BIR Ruling No. NSNP(S30E-015)-064-2010 Joel V. Ouano Law Office Office of the Economic Affairs Patria de Cebu Building P. Burgos Street, Cebu City Attention: Atty. Joel V. Ouano Gentlemen : This refers to your letter dated March 9, 2010, relative to the letter dated December 21, 2009 of the Provincial Superior of the Sacred Hearts of Jesus and Mary Phils., Inc., which was referred to this Office by Revenue Region No. 13, Cebu City, by way of its Ist Indorsement dated March 8, 2010, requesting for exemption from the payment of income tax and filing of the corresponding income tax return under Section 30 of the Tax Code of 1997. Documentary evidence submitted to this Office disclosed that the Provincial Superior of the Sacred Hearts of Jesus and Mary Phils.,Inc. is a corporation sole duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. CN200529207 dated October 3, 2005 with TIN 223-905-483-000. Based on the foregoing, this Office is of the opinion and so holds that the Provincial Superior of the Sacred Hearts of Jesus and Mary Phils., Inc. is a corporation sole as contemplated under Section 30 (E) of the Tax Code of 1997. Accordingly, it is exempt from the payment of income tax on income received by it as such organization, and therefore, need not file an income tax return concerning such income. SEDaAH However, the Provincial Superior of the Sacred Hearts of Jesus and Mary Phils., 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. (BIR Ruling No. 015-95 dated February 9, 1995) 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. TAcDHS Moreover, the Provincial Superior of the Sacred Hearts of Jesus and Mary Phils.,Inc. is required to file on or before the 15th day of the fourth month following the end of the accounting period a Profit & 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. [NSNP-(S30G-016) 125-09] dated February 24, 2009) It should be understood that the said exempt organization 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. DA-252-99 dated April 23, 1999) 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. It is subject to the payment of the annual registration fee of P500.00 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]. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue