BIR Ruling No. 121-13

March 22, 2013 BIR RULING NO. 121-13 1997 Tax Code, Section 27 (A) & Section 30 Establish Events, Inc. 1560 5th Street Main Paco Manila Attention: Leonnard dela Torre Director Gentlemen : This refers to your letter dated July 13, 2012 requesting on behalf of Establish Events, Inc. exemption from income tax on the proceeds of the show, The Japanese Drum Tao Event (the "Event"), which was staged on July 12 to 22, 2012 (10 shows) at the Newport City Performing Arts Theater, Resorts World, Manila and on September 1, 2012 (2 shows) at the Pacific Grand Ballroom of Waterfront Cebu Hotel and Casino. EScaIT It is represented that Establish Events, Inc. , with Taxpayer's Identification No. 008-264-713-000, is a domestic corporation duly organized under the laws of the Philippines; that it is registered with the Securities and Exchange Commission (SEC), bearing SEC Registration No. CS201207050; and that the primary purpose for which it was organized is to establish, operate, maintain and carry on the business of event organizing services and/or otherwise engaging in other kinds of services which are incidental to or in connection therewith; that on June 18, 2012, Establish Events, Inc. entered into a Memorandum of Agreement ("Agreement") with ABS-CBN Foundation, Inc., a non-stock, non-profit organization, whereby the former undertook to donate to the latter a portion of the proceeds of the Event in the maximum amount of Four Hundred Thousand Pesos (Php400,000.00) and in return, ABS-CBN Foundation, Inc. will promote the Event through the various media outlets of ABS-CBN Network. In reply, please be informed that under Section 27 of the National Internal Revenue Code of 1997 ( "Tax Code" ), as amended, a domestic corporation, like Establish Events, Inc. , is subject to income tax with respect to income derived from all sources within and without the Philippines, to wit: "(A) In General. Except as otherwise provided in this Code, an income tax of thirty-five percent (35%) is hereby imposed upon the taxable income derived during each taxable year from all sources within and without the Philippines by every corporation, as defined in Section 22(B) of this Code and taxable under this Title as a corporation, organized in, or existing under the laws of the Philippines: Provided, That effective January 1, 2009, the rate of income tax shall be thirty percent (30%)." On the other hand, Section 30 of the Tax Code, as amended, enumerates the corporations/organizations which are exempt from income tax, viz. : "SEC. 30. Exemptions from Tax on Corporations . The following organizations shall not be taxed under this Title in respect to income received by them as such: (A) Labor, agricultural or horticultural organization not organized principally for profit; (B) Mutual savings bank not having a capital stock represented by shares, and cooperative bank without capital stock organized and operated for mutual purposes and without profit; cSIADH (C) A beneficiary society, order or association, operating for the exclusive benefit of the members such as a fraternal organization operating under the lodge system, or mutual aid association or a non-stock corporation organized by employees providing for the payment of life, sickness, accident, or other benefits exclusively to the members of such society, order, or association, or non-stock corporation or their dependents; (D) Cemetery company owned and operated exclusively for the benefit of its members; (E) Non-stock corporation or association organized and operated exclusively for religious, charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans, no part of its net income or asset shall belong to or inures to the benefit of any member, organizer, officer or any specific person; (F) Business league chamber of commerce, or board of trade, not organized for profit and no part of the net income of which inures to the benefit of any private stockholder, or individual; (G) Civic league or organization not organized for profit but operated exclusively for the promotion of social welfare; (H) A non-stock and non-profit educational institution; (I) Government educational institution; (J) Farmers' or other mutual typhoon or fire insurance company, mutual ditch or irrigation company, mutual or cooperative telephone company, or like organization of a purely local character, the income of which consists solely of assessments, dues, and fees collected from members for the sole purpose of meeting its expenses; and (K) Farmers', fruit growers', or like association organized and operated as a sales agent for the purpose of marketing the products of its members and turning back to them the proceeds of sales, less the necessary selling expenses on the basis of the quantity of produce finished by them; TcDAHS xxx xxx xxx" Establish Events, Inc. , a domestic corporation primarily engaged in the business of event organizing, failed to show that it falls under one of those organizations exempt from income tax as contemplated under the above-quoted provision. It is a governing principle in taxation that tax exemptions are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. The basic principle in the construction of laws granting tax exemptions has been very stable. He who claims an exemption from his share of the common burden of taxation must justify his claim by showing that the Legislature intended to exempt him by words too plain to be beyond doubt or mistake ( City of Iloilo, et al. vs. Smart Communications, Inc., G.R. No. 167260 dated February 27, 2009). Accordingly, your request for exemption from income tax is hereby denied for lack of legal basis. In view of the foregoing, your request for tax exemption is hereby denied. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue