BIR Ruling No. 162-14

May 30, 2014 BIR RULING NO. 162-14 Palm Village Association, Inc. 125 Zodiac St., Palm Village, Brgy. Guadalupe Viejo Makati City Attention: Ruel M. Carbonell Village-OIC Gentlemen : This refers to your letter dated December 26, 2013 requesting for confirmation of Palm Village Association as an exempt organization under Section 30 (G) of the National Internal Revenue Code of 1997, as amended (NIRC). It is represented that Palm Village Association is a nonstock nonprofit association organized to promote the best interest and well-being, as well as to safeguard the welfare of the residents and owners of property in Palm Village. It earns income from association dues from members, rentals of common areas, sales of car stickers, parking fees, and registration and ID of household personnel. Section 30 (G) provides for exemption of civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare. An organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community. An organization embraced within this section is one which is operated primarily for the purpose of bringing about civic betterments and social improvements. cTEICD Along with police power and eminent domain, taxation is one of the three basic and necessary attributes of sovereignty. Thus, the State cannot be deprived of this most essential power and attribute of sovereignty by vague implications of law. Rather, being derogatory of sovereignty, the governing principle is that tax exemptions are to be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority; and he who claims an exemption must be able to justify his claim by the clearest grant of statute. Tax exemptions must be construed strictly against the taxpayer and liberally in favor of the taxing authority. The burden of proof rests upon the party claiming exemption to prove that it is in fact covered by the exemption so claimed. In case of doubt, non-exemption must be favored. Taxes being the lifeblood of the government that should be collected without unnecessary hindrance, every precaution must be taken not to unduly suppress it. (BIR Ruling No. 310-2011 dated August 22, 2011) A perusal of the documents submitted by Palm Village Association, Inc. shows that it does not propose to offer services for the direct betterment of the community as a whole. It is a privately-devoted endeavor. Its work in part incidentally redounds to society but this is not the "social welfare" of the tax statute. Since the organization's activities are for the private benefit of its members, it cannot be said to be operated exclusively for the promotion of social welfare. IN VIEW OF THE FOREGOING, this Office is of the opinion that Palm Village Association, Inc. does not qualify for exemption under Section 30 (G) of the NIRC. It is therefore liable for income taxes imposed under Title II of the NIRC. LexLib Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue