BIR Ruling No. 131-12

February 24, 2012 BIR RULING NO. 131-12 Section 30 (E) of the 1997 NIRC; BIR Ruling No. 448-2011 St. Francis Bibles, Inc. 4th Floor, St. Francis Square Julia Vargas Ave. cor. Bank Drive Ortigas Center, Mandaluyong City Attention: Bessie C. Manzano Director Gentlemen : This refers to your letter dated October 24, 2011 requesting for a confirmation of opinion that St. Francis Bibles, Inc. (SFBI) is a non-stock, non-profit religious corporation exempted from the payment of income tax under Section 30 (E) of the Tax Code of 1997, as amended. It is represented that SFBI (formerly St. Francis Bookstore, Inc.) with Taxpayer's Identification No. 005-297-928-000 is a non-stock, non-profit corporation duly organized under the laws of the Philippines. It was only on August 26, 2011 did the Securities and Exchange Commission (SEC) approved the amendment to the taxpayer's Articles of Incorporation for the change from a stock corporation to a non-stock, non-profit religious corporation. Prior to the amendment, the Company's primary purpose is to carry a general merchandise and commercial business, buying or otherwise acquiring, holding, importing and exporting, selling and otherwise disposing of and dealing in books, papers, magazines, periodicals and school and office supplies, of all descriptions, and in products, natural or artificial, of the Philippines or other countries, or in goods, wares, merchandise or anything of any nature which is or may become articles of commerce. It is registered with the SEC under Company Reg. No. A1997-10085 and now the purpose for which it was incorporated is to propagate the message of new life in Christ Jesus by reaching out to people in the Philippines, in East Asia and other parts of the world, and a. To propagate the Bible, Scripture portions, Christian books, literatures and religious materials consistent with the primary purpose and the Corporation's statement of faith; aIcETS b. To engage in importation, exportation and distribution of Bibles, books, Christian literatures, tapes, videos and religious items of Christian message or extolling Christian values in order to accomplish its primary objectives; c. To receive and acquire donations, grant, exchange, device, bequest, purchase, lease, either absolutely or in trust, receive contributions from any persons, corporation, foundation, board, or entity whatsoever, of such properties, real and personal, including funds and valuable effects as may be useful or necessary to carry out the purpose and objectives of the Corporation and to hold, manage, use or otherwise dispose of the same; d. To purchase, acquire operate and maintain all or any part of the property, interest, claim or business of any person in any firm, partnership, association or corporation and to acquire and hold in its name subject to existing laws, rules and regulations, any interest, stocks, securities, bonds or other property in any firm, corporation, partnership or other judicial entity as may be necessary and proper for or incidental to the conduct of its business as a book store, printer or publisher; e. Generally, to do each and everything necessary, suitable, or proper for the accomplishment or the attainment of the purposes and its objects. In reply, please be informed that this Office cannot as yet issue the requested ruling/certificate of tax exemption because SFBI has to prove by actual operation for at least three (3) years that it is really an organization exempt from income tax under Section 30 (E) of the Tax Code of 1997, as amended. SFBI 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. aAcDSC However, SFBI 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. (BIR Ruling No. 448-2011 dated November 11, 2011) 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. 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. 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. 448-2011 dated November 11, 2011) SFBI 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] IEcaHS Finally, for purposes of securing a permanent exemption after the three (3)-year period, SFBI is required to submit the following documents pursuant to Revenue Memorandum Circular No. 14-2001: 1) Letter application for tax exemption; 2) Certified true copy of the Certificate of Registration with the SEC; 3) Certified true copy of the Articles of Incorporation and By-Laws; 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 (E) of the NIRC, as amended; c. That no part of the net income shall inure to the benefit of any of its members; d. In case of dissolution, assets of the corporation shall be transferred to similar institution or to the government. 4) Certified true copy of the By-Laws which states: a. Members of the Board of Trustees shall not receive any compensation; 5) Certified true copies of the Annual Information Returns and Financial Statements for the last three (3) years of operation; 6) Original copy of the Affidavit of Non-forum Shopping; 7) BIR Certificate of Registration; and 8) Other pertinent documents. This ruling is being issued on the basis of the foregoing facts as presented. However, if upon investigation it will be ascertained that the facts are different, then this ruling shall be considered as null and void. STcHDC Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue