BIR Ruling No. 191-15

June 10, 2015 BIR RULING NO. 191-15 Section 30 (G) of the Tax Code of 1997; BIR Ruling No. 174-11; BIR Ruling No. 154-11; BIR Ruling No. 148-11; BIR Ruling No. 147-11; BIR Ruling No. 144-11 AES Philippines Power Foundation, Inc. 12F Picadilly Star Bldg. 4th Ave. corner 27th Streets Bonifacio Global City, Taguig City Attention :Cynthia V. Pantonal Executive Director Gentlemen : This refers to your letter dated February 24, 2014 duly indorsed by Revenue Region No. 8-Makati City requesting for the issuance of a certificate of tax exemption enjoyed by a civic league or organization not organized for profit but operated exclusively for the promotion of social welfare pursuant to Section 30 (G) of the Tax Code of 1997, as amended. ITAaHc It is represented that AES Philippines Power Foundation, Inc. with Taxpayer's Identification No. 008-196-315-000, is a corporation duly organized under the laws of the Philippines; that it is registered with the Securities and Exchange Commission (SEC) under Registration No. CN201200699 dated January 16, 2012; and that the purposes for which it was incorporated are the following: 1. To develop policies and programs that will reflect the institutional character and corporate values of Masinloc Power Partners Co. Ltd. and its affiliates in the Philippines (collectively "AES Philippines"); 2. To provide oversight support to the various implementing community and socio-economic programs of AES Philippines; 3. To develop, undertake, implement and support national and local social development programs of AES Philippines including its corporate social responsibility program; 4. To network and develop partnership with government, business, academe, civil society and other organizations to develop the corporate social responsibility advocacy of AES Philippines; CHTAIc 5. To accept donations of, acquire, purchase, own, hold, operate, lease, mortgage, pledge, exchange, sell, transfer, or otherwise, in any manner permitted by law, real and personal property of every kind and description or any interest therein as may be necessary for or conducive to the carrying out of its purposes, provided that in the event of dissolution, the existing assets of the Foundation shall be passed on to another accredited non-governmental organization ("NGO") or organization of similar purpose or purposes, or to the State for public purpose or purposes, or would be distributed by competent court of justice to another accredited NGO to be used in such manner as in judgment of said court shall be best accomplish the general purpose for which the dissolved organization was organized; 6. To raise money for any of the purposes of the Foundation and from time to time, without limit as to amount, to draw, make, accept, endorse, guarantee, execute and issue promissory notes, bonds, drafts, bills of exchange, warrants, and other negotiable or non-negotiable instruments and evidences of indebtedness, and to secure the payment thereof and of the interest, thereon by mortgage or pledge, conveyance or assignment in trust, of the whole or any part of the assets of the Foundation, real, personal or mixed including contract rights, whether at the time owned or thereafter acquired, and to sell, pledge, or otherwise dispose of such securities or other obligations of the Foundation for its corporate purposes; and 7. To utilize the funds of the Foundation in furtherance of its purposes, provided, that no part of the net income or asset of the Foundation shall belong to or inure to the benefit of any member, organizer, officer or any specified person, that all the members of the Board of Trustees shall not receive compensation or remuneration for the services to the Foundation and that at least seventy percent (70%) of the total funds of the Foundation shall be utilized to accomplished its projects and objectives and not more than thirty percent (30%) of such funds shall be utilized for administrative expenses. EATCcI In reply, please be informed that this Office cannot as yet issue the requested ruling/certificate of tax exemption because AES Philippines Power Foundation, Inc. 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 (G) of the Tax Code of 1997, as amended. AES Philippines Power Foundation, Inc. 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. (BIR Ruling No. 179-11 dated June 7, 2011 and BIR Ruling No. 144-11 dated May 4, 2011) Hence, AES Philippines Power Foundation, Inc. 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. 154-11 dated May 17, 2011, BIR Ruling No. 148-11 dated May 12, 2011 and BIR Ruling No. 147-11 dated May 4, 2011) DHITCc It should be understood that the said 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. (BIR Ruling No. 179-11 dated June 7, 2011 and BIR Ruling No. 144-11 dated May 4, 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. (BIR Ruling No. 179-11 dated June 7, 2011 and BIR Ruling No. 144-11 dated May 4, 2011) 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. cEaSHC It 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]. Finally, for purposes of securing a tax exemption ruling after the three (3)-year period, AES Philippines Power Foundation, Inc. shall file its application for Tax Exemption with the Revenue District Office (RDO) where it is registered and is required to submit the following documents pursuant to Revenue Memorandum Order No. 20-2013: a. Original copy of application letter for issuance of Tax Exemption Ruling. The letter shall cite the particular paragraph of Section 30 of the NIRC, as amended, under which the application for exemption/revalidation is being based; b. Certified true copy of the latest Articles of Incorporation and By-Laws issued by the Securities and Exchange Commission; c. Original copy of Certification under Oath by an executive officer of the corporation or association as to: (i) all previous amendments/changes in the Articles of Incorporation and By-Laws, (ii) manner of activities, and (iii) the sources and disposition of income, if any, of the subject corporation or association. If there are no amendments/changes, the Certification shall state this fact. CTIEac d. Certified true copy of the Certificate of Registration with the BIR; e. Original copy of the Certification under Oath by the Treasurer of the corporation or association as to the amount of income, compensation, salaries or any emoluments paid by the corporation or association to its trustees, officers and other executive officers. Provided, that, a corporation sole, which, by its nature, does not have trustees, corporate officers or executive officers need not submit the certification required under this subparagraph; f. Original copy of the Certification issued by the RDO where the corporation or association is registered that the corporation or association is not the subject of any pending investigation, on-going audit, pending tax assessment, administrative protest, claim for refund or issuance of tax credit certificate, collection proceedings, or a judicial appeal; or if thereby be any, the Original copy of the Certification issued by the RDO on the status thereof; g. Certified true copies of the Income Tax Returns or Annual Information Returns and Financial Statements of the corporation or association for the last three (3) years; and h. Original copy of a statement under Oath by an executive officer of the corporation or association as to its modus operandi which shall include: i. A full description of the past, present, and proposed activities of the corporation or association; ii. A narrative description of anticipated receipts and contemplated expenditures; and iii. A detailed description of all revenues which it seeks to be exempted from income tax. All other revenues which are not included in the statement/application shall be subject to income tax. SaCIDT 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. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue