BIR Ruling No. 096-12

February 16, 2012 BIR RULING NO. 096-12 R.A. 9178; RMC No. 40-04; BIR Ruling No. 207-2011; BIR Ruling No. 248-2011; BIR Ruling No. 249-2011 CONTEMPORANEO, Inc. 369 Numeriano Cruz St., Villa Raymundo, Palatiw, Pasig City Attention: Ms. Imelda M. Milambiling Corporate Secretary Madam : This refers to your letter dated June 1, 2009 received by this Office on September 2, 2009 via Memorandum from Revenue Region 7, RDO No. 43-B West Pasig dated August 15, 2009 requesting exemption from the payment of income tax pursuant to the provisions of Republic Act (R.A.) No. 9178. Documents submitted disclose that CONTEMPORANEO, INC., with Taxpayer Identification No. 007-243-300-000, is a domestic corporation registered with the Securities and Exchange Corporation (SEC) under SEC Registration No. CS20091918 dated February 12, 2009; that CONTEMPORANEO, INC. is engaged in the manufacture and selling of different kinds of furniture with export quality; that pursuant to Republic Act No. 9178, otherwise known as "An Act to Promote the Establishment of Barangay Micro Business Enterprises (BMBEs), Providing Incentives and Benefits Therefor, and for other Purposes", CONTEMPORANEO, INC. was registered and awarded a Barangay Micro Business Enterprise (BMBE) Certificate of Authority No. 136 on May 21, 2009 entitling you to all benefits and incentives subject to the terms and conditions set forth in the said law, which will expire on May 21, 2011; and that CONTEMPORANEO, INC. was again issued BMBE Certificate of Authority No. 219 on May 26, 2011 which will expire on May 26, 2013. SEACTH In reply, please be informed that Sections 3 (a) and 7 of R.A. 9178 provide, viz.: "SEC. 3. Definition of Terms. As used in the Act, the following terms shall mean: (a) "Barangay Micro Business Enterprise," hereinafter referred to as BMBE refers to any business entity or enterprise engaged in the production processing or manufacturing of products or commodities including agro-processing: trading and services, whose total assets including those arising from loans but exclusive of the land on which the particular business entity's office, plant and equipment are situated, shall not be more than Three Million Pesos (P3,000,000.00). The definition shall be subject to review and upward adjustment by the SMED Council, as mandated under Republic Act No. 6977, as amended by Republic Act No. 8289. xxx xxx xxx SEC. 7. Exemption from Taxes and Fees. All BMBEs shall be exempt from income tax for income arising from the operations of the enterprise. The LGUs are encouraged either to reduce the amount of local taxes, fees and charges imposed or to exempt the BMBEs from local taxes, fees and charges." Department Order (D.O.) No. 17-04, as circularized by Revenue Memorandum Circular (RMC) No. 40-04 dated May 26, 2004, provided for the "Guidelines to Implement the Registration of Barangay Micro Business Enterprises and the Availment of Tax Incentives under R.A. 9178, otherwise known as the "Barangay Micro Business Enterprises (BMBEs) Act of 2002". Pertinent provision of D.O. No. 17-04 states: "RULE 3 "GUIDELINES IN THE AVAILMENT OF INCOME TAX EXEMPTION Sec. 1. Exemption from Income Tax. A duly registered BMBE shall be exempt from income tax on income arising purely from its operations as such BMBE: Provided, That this income tax exemption shall not apply to the following: DCAEcS (a) Interest, including those from any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements; (b) Royalties; (c) Prizes and other winnings; (d) Cash and/or property dividends; (e) Capital gains from the sale of shares or stock not traded through the stock exchange; (f) Capital gains from the sale or other disposition of real property; (g) The share of an individual in the net income after tax of an association, a joint account, or a joint venture or consortium; (h) The share of an individual in the distributable net income after tax of a taxable partnership of which he is a partner; (i) Income from the practice of profession received directly from the clients or from the professional partnership of which the individual is a partner; (j) Compensation; and (k) All other forms of passive income and income from revenues not effectively connected with or arising from operations of the BMBEs as such." Inasmuch as CONTEMPORANEO, INC. is a registered BMBE and was awarded BMBE Certificate of Authority by the City of Pasig, it is therefore exempt from the payment of income tax for income arising from the operations of the enterprise for a period of two (2) years from May 26, 2011 until May 26, 2013. (BIR Ruling No. 207-2011 dated July 1, 2011; BIR Ruling No. 248-2011 dated July 26, 2011; and BIR Ruling No. 249-2011 dated July 26, 2011) However, the income tax exemption of CONTEMPORANEO, INC. shall not apply to its income from the following: (a) Interest, including those from any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements; HICEca (b) Royalties; (c) Prizes and other winnings; (d) Cash and/or property dividends; (e) Capital gains from the sale of shares of stock not traded through the stock exchange; (f) Capital gains from the sale or other disposition of real property; (g) The share of an individual in the net income after tax of an association, a joint account or a joint venture or consortium; (h) The share of an individual in the distributable net income after tax of a taxable partnership of which he is a partner; (i) Income from the practice of profession received directly from the clients or from the professional partnership of which the individual is a partner; (j) Compensation; and (k) All other forms of passive income and income from revenues not effectively connected with or arising from operations of the BMBE as such. For purposes of exemption from the creditable withholding tax on income payments, CONTEMPORANEO, INC. shall furnish its customers with a certified true copy of its amended BIR registration certificate. (Sec. 3, Rule 3, D.O. No. 17-04) Furthermore, CONTEMPORANEO, INC. is required to register as a BMBE with the Revenue District Office having jurisdiction over you. (Sec. 3, Rule 3, D.O. No. 17-04) As such, it is subject to the payment of an annual registration fee of Five Hundred Pesos (P500.00) as prescribed in Section 236 (B) of the Tax Code of 1997, as amended, upon its registration as such, and every year thereafter on or before the last day of January. Finally, it is required to file on or before the 15th day of the fourth month following the end of the accounting period an Annual Information Return, together with an Account Information Form, or its equivalent, containing data lifted from audited financial statements and a sworn statement of assets owned and/or used in business. (Sec. 4, Rule 3, D.O. No. 17-04) 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. HcDATC Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue