BIR Ruling No. 175-61

May 4, 1961 BIR RULING NO. 175-61 1st Indorsement Returned to the Revenue Operations Executive (Assessment), BIR, Manila, the docket bearing on the income and withholding tax liability of the Phoenix Assurance Company, Ltd. for 1955. The position of this Office to the effect that resident-foreign insurance companies are entitled to only 5% of their net incomes as shares in head office administrative expenses is now well-established. With respect to the withholding tax liability of domestic and resident-foreign companies, the position of this Office to the effect that reinsurance premiums deed to non-resident foreign insurance companies under the so-called reinsurance treaties executed abroad are subject to the withholding tax on the total amount thereof is likewise duly established. However, as a temporary arrangement during the pendency of the court cases involving this question, we allowed the withholding agents to withhold the tax on the remittance premiums only, but they shall remain liable for any deficiency withholding tax that may be assessed according to the decision in said cases; and that the collection of assessments prior to 1959 may be held in abeyance, pending the decision of the cases now before the Court of Tax Appeals, provided that the taxpayers concerned execute waivers of the statute of limitations. (BIR Rulings Nos. 441, 520, and 525, all series of 1960). He is advised to be guided accordingly. cdtech (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue attached a copy of the character or articles of incorporation, the by-laws of the organization, and the latest financial statement showing the assets, liabilities, receipts, and disbursements of the organization. Upon receipt of the affidavit and other papers by the Collector of Internal Revenue, the organization will be informed whether or not it is exempt. When an organization has established its right to exemption, it need not thereafter make a return of income or any further showing with respect to its status under the law, unless it changes the character of its organization or operations or the purposes for which it was originally created". Query No . 1 . It is clear from the foregoing provisions of the regulations than an organization claiming exemption under Section 27 of the Tax Code, must first comply with the requirements provided for under Section 24 of Revenue Regulations No. 2 before it may be relieved from the obligation of filing an income tax return. Query No . 2 . As a general rule, fraternal associations, and business leagues which are not engaged in or doing business in the Philippines are not subject to the basic and additional residence taxes prescribed in Section 2 of the Residence Tax Law, unless such fraternal associations and business leagues own real properties and income is received therefrom. Query No . 3 . Where such association received income from its real properties for rental purposes, although the same is not its principal business for which it was created, the said income received is taxable and whatever expenses incurred in the maintenance of the rental properties from which taxable income is received are allowable deductions, pursuant to Section 30(a)(1) of the Tax Code. Query No . 4 . Fraternal associations and business leagues required under Section 194(s) of the Tax Code to be so provided with the necessary privilege tax receipt as real estate dealer, although such activity is only secondary to the principal purpose for which the same was organized, is deemed to be engaged in business and is, therefore, liable for the payment of the basic tax of P5.00 and an additional residence tax according to the schedule prescribed in Section 2 of the Residence Tax Law. "Business" is that which occupies the time, attention, and labor of men for the purpose of livelihood or profit, but it is not necessary that it should be the sole occupation or employment". (State vs. Louisiana Baking Corporation, La. App., 153 So. 41, 43, Words & Phrases, Vol. 5, p. 999) "Business is that which occupies time, attention, and labor of men for the purpose of livelihood or profit, but it is not necessary that it should be sole occupation or employment, and embraces everything about which a person can be employed." (Wellingford v. Slattery, 200 N.E. 206, 207, 51 Ohio App. 225, Words & Phrases, Vol. 5, p. 1001). Fees or dues paid by members of said corporation or association are not, however, considered part of the gross receipts, for purposes of the residence tax law. In the computation of the additional residence tax due from such corporation or association, the value of its real property and its receipts for the preceding calendar year should be included. Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue