BIR Ruling No. 209-13

June 14, 2013 BIR RULING NO. 209-13 Sec. 30 (E) of the Tax Code of 1997; BIR Ruling No. 174-2011; BIR Ruling No. 172-2011; BIR Ruling No. 165-2011; BIR Ruling No. 115-2011 Manila Bayshore Heritage Foundation, Inc. 10th Flr. Newport Entertainment & Commercial Center, Newport Blvd., Newport Cybertourism Economic Zone, Pasay City 1300 Attention: Mr. Dexter Moya Assistant Director-Finance Gentlemen : This refers to your letter dated January 3, 2013, requesting in behalf of Manila Bayshore Heritage Foundation, Inc. (MBHFI for brevity) , for the issuance of a certificate of tax exemption enjoyed by an association or organization not organized for profit but operated exclusively for purposes under Section 30 (E) of the Tax Code of 1997, as amended. SIDTCa It is represented that MBHFI with Taxpayer's Identification No. 008-119-814-000, is a non-stock, non-profit corporation duly organized under the laws of the Philippines; that it is registered with the Securities and Exchange Commission (SEC) under Registration No. CN201115722 dated September 7, 2011; and that among the purposes for which it was incorporated are the following: "To engage principally in various activities for charitable, educational, cultural, artistic, and scientific purposes, and to promote, perpetuate, preserve and encourage Filipino Culture and the arts, history and humanities, through services such as: a. Establishment of scholarship funds and endowment funds, to give scholarships, fellowships, assistantships, grant-in-aid, research grants, publication grants, building and/or equipment grants, operational grants, and the like to deserving institutions, as well as individuals pursuing the goals of the Corporation; b. Community outreach programs and services such as medical and dental missions for indigent families; c. Relief interventions to communities stricken by calamities and disasters; and d. Programs to preserve Filipino cultural heritage and the arts, history and the humanities." In support of its request, MBHFI has completely submitted the following documents: 1) Letter application for tax exemption; 2) Certified true copy of the Certificate of Registration with the SEC; 3) Certified true copy of the amended Articles of Incorporation which includes the following provisions: 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 of the Tax Code of 1997, as amended; c. That no part of the property, asset or net income which the Corporation may obtain as an incident to its operation shall be distributed as dividends to its members, trustees or officers; ETIHCa d. Members of the Board of Trustees shall not receive any compensation nor any type of remuneration in cash or in kind for their services rendered; d. In the event of dissolution of the Corporation, its remaining assets, after payment of its liabilities, shall be conveyed and transferred to another non-stock, non-profit domestic corporation organized for similar purpose or purposes, or to the government of the Republic of the Philippines. 4) Certified true copy of the By-Laws; 5) Certified true copies of the Annual Income Tax Return and Financial Statements for the period September 7, 2011 to December 31, 2011; 6) BIR Certificate of Registration; 7) Copy of the BIR Payment Form for the current year's Registration Fee; and 8) Affidavit of Non-Forum Shopping. In reply thereto, please be informed that this Office cannot as yet issue the requested ruling/certificate of tax exemption because MBHFI has to prove by actual operation for at least three (3) years that it is really a corporation/association exempt from income tax under Section 30 (E) of the Tax Code of 1997, as amended. (BIR Ruling No. 174-2011 dated May 27, 2011) MBHFI 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. 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. TEcADS However, MBHFI 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 similar arrangements, royalties derived from sources within the Philippines are subject to the 20% final withholding tax: 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. Moreover, it is required to file on or before the 15th day of the fourth month following the end of the accounting 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. 172-2011 dated May 25, 2011) It should be understood that MBHFI 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. 165-2011 dated March 23, 2011 and BIR Ruling No. 115-2011 dated April 12, 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. 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 permanent exemption after the three (3) year period, MBHFI is required to submit the following documents pursuant to Revenue Memorandum Circular No. 14-2001: 1. Certified true copy of the Certificate of Registration with the SEC; 2. Certified true copy of the Articles of Incorporation which includes the following provisions: EaCDAT 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 of the Tax Code of 1997, as amended; c. That no part of the net income shall inure to the benefit of any of its members; d. That the trustees do not receive any compensation; and e. In case of dissolution, assets of the corporation shall be transferred to similar institution or to the government. 3. Certified true copy of the By-Laws; and 4. Certified true copy of the Annual Income Tax Returns and Financial Statements for the last three (3) years of operation; 5. Certification under oath that there has not been any change in the By-Laws, Articles of Incorporation, manner of activities as well as the sources and disposition of income; 6. BIR Certificate of Registration; and 7. Copy of the BIR Payment Form for the current year's Registration Fee. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed 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