BIR Ruling No. 091-12

February 16, 2012 BIR RULING NO. 091-12 Section 30 (G) of the Tax Code of 1997; BIR Ruling No. 179-11; BIR Ruling No. 154-11; BIR Ruling No. 148-11; BIR Ruling No. 147-11; BIR Ruling No. 144-11 Sister Clarette-Rosario Foundation, Inc. Pres. Magsaysay Extension, Kasambagan Cebu City 6000 Attention: Sister Milagros F. Sandoval, SSpS President Sister Amelia A. Trabajo, SSpS Treasurer Gentlemen : This refers to your letter dated August 16, 2010 requesting on behalf of SISTER CLARETTE-ROSARIO FOUNDATION, INC. for the issuance of a certificate of tax exemption enjoyed by a non-stock corporation under 30 (G) of the Tax Code of 1997 as amended. ISaCTE It is represented that of SISTER CLARETTE-ROSARIO FOUNDATION, INC. with Taxpayer's Identification No. 294-807-987, is a non-stock, non-profit association duly organized under the laws of the Philippines; that it is registered with the Securities and Exchange Commission (SEC) under Registration No. CN201025667 dated June 10, 2010; and that the purposes for which the association was incorporated are: "To support the VISION-MISSION and Programs of the Mission Congregations of the Servants of the Holy Spirit, Philippine South, in response to the current issues and concerns of the society, with focus on the following: 1) Formation of the SSpS and lay Mission-Partners to sustain the varied ministries toward communion of LIFE 2) Promote just and equitable education towards a gender-fair community Scholarships Design and implement a gender-fair curriculum 3) Promote, respect and protect the rights and dignity of children, women and men Consciousness Raising on Women issues such as Violence Against Women and Children (VAWC), Human Trafficking, HIV/AIDS Provide temporary shelter for battered/abuse women Guide and Counsel Rehabilitate prostituted women 4) Educate Indigenous Peoples on their identity and teach them basic skills for their self-sustainability, through livelihood training 5) Promote ecological balance and sustainable organic farming 6) To conduct microfinance operations pursuant to Republic Act 8425, the Social Reform and Poverty Alleviation Act" In support of its request, SISTER CLARETTE-ROSARIO FOUNDATION, INC. has completely submitted on August 22, 2011 the following documents: 1) Letter application for tax exemption; 2) Certified machine copy of the SEC Certificate of Incorporation; 3) Certified machine copy of the Amended Articles of Incorporation which includes the following provisions: a) That the corporation is non-stock and non-profit association; 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 property or income shall inure to the benefit of any member, officer, organizer or any individual person" ; d) "That the members of the Board of Trustees will NOT receive any compensation" ; and e) "In the event of dissolution, the assets of Sister Clarette-Rosario Foundation, Inc. will be distributed to the different ministries of the SSpS Missionary Sisters." 4) Certified machine copy of the By-Laws; 5) Certified machine copy of the 2011 General Information Sheet; 6) Certified true copy of the 2010 Annual Income Tax Return and Financial Statement; and 7) Certified true copy of the BIR Certificate of Registration. In reply, please be informed that this Office cannot as yet issue the requested ruling/certificate of tax exemption because SISTER CLARETTE-ROSARIO FOUNDATION, INC. has to prove by actual operation for at least three (3) years that it is really a corporation/association exempt from income tax under Section 30 (E) of the Tax Code of 1997, as amended. (BIR Ruling No. 179-11 dated June 7, 2011) DISEaC SISTER CLARETTE-ROSARIO 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 following the end of its taxable year 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. However, SISTER CLARETTE-ROSARIO 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. 154-11 dated May 17, 2011) It should be understood that SISTER CLARETTE-ROSARIO 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. 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. 148-11 dated May 12, 2011; BIR Ruling No. 147-11 dated May 12, 2011; BIR Ruling No. 144-11 dated May 4, 2011) 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]. Finally, for purposes of securing a permanent exemption after the three (3)-year period, SISTER CLARETTE-ROSARIO 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: TcDAHS 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 of 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; 4) Certified true copy of the Annual Information Returns and Financial Statements for the last three (3) years of operation; 5) Certification under oath that there has not been any change in the By-Laws, Articles of Incorporation, manner of activities as well as the sources and disposition of income; 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 ascertained that the facts are different, then this ruling shall be considered null and void. STaHIC Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue