BIR Ruling No. 213-13

June 14, 2013 BIR RULING NO. 213-13 Section 30 (E) of the Tax Code of 1997, as amended; BIR Ruling No. 158-11; BIR Ruling No. 153-11; BIR Ruling No. 138-11; and BIR Ruling No. 024-11 First International Sacrifice Valley Kilusang Katoliko of Hermosa, Bataan, Inc. Brgy. Sacrifice Valley, Hermosa Bataan 2111 Attention: Maria Luisa G. Macapagal Chairman of the Board Gentlemen : This refers to your letter dated March 4, 2011 requesting for the issuance of a Certificate of Tax Exemption enjoyed by Non-stock Corporation organized and operated exclusively for religious purposes under Sec. 30 (E) of the Tax Code of 1997, as amended. It is represented that First International Sacrifice Valley Kilusang Katoliko of Hermosa, Bataan, Inc. (FISVKKHBI) with Taxpayer's Identification No. 007-875-743-000, 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. CN201014950; and that the purposes of the religious corporation are the following: 1. To establish and organize where it has not yet been established, promote, and perpetuate the movement known as First International Sacrifice Valley Kilusang Katoliko of Hermosa, Bataan, Inc. in order to propagate and institutionalize the teachings of Jesus Christ through the teachings, doctrines and dogmas of the Holy Trinity Catholic Church of Hermosa, Bataan, Inc., as guided and enlightened by the Holy spirit, our Beloved Ingkong, through the manifestation of the Holy Covenant, St. Maria Virginia P. Leonzon; 2. To establish and maintain the spirit of Christian movement in schools and institutions for the instruction in and the promotion of Christianity and the studies for the intellectual, moral and physical development and improvement of its members and followers; DEHaAS 3. To promote religious guidance, to print publications and other literatures; to engage in any/all human activities, necessary and convenient for carrying out the purposes for which this organization is created; to use all legal and useful methods for the successful attainment of the objectives of this organization; 4. To lease suitable buildings and equipment and to acquire by purchase or gift such personal or real properties as may be necessary to carry out the objectives of this organization and to receive subscriptions and donations of real and personal properties to be applied for the use of this organization, and to execute such trust, to mortgage, consign, encumber any of its properties, real or personal or to sell or convey the same; to lease or allow the use of any of its properties; and 5. To mobilize all possible resource, both human and material, private and public, to carry out these purposes. In reply, please be informed that this Office cannot as yet issue the requested ruling/certificate of tax exemption because FISVKKHBI 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. 165-11 dated May 23, 2011) FISVKKHBI 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. However, FISVKKHBI 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. 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. 115-11 dated April 12, 2011) DSAICa It should be understood that FISVKKHBI 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. 093, dated April 5, 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. EaHcDS 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, FISVKKHBI 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: 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; 4) Certified true copies of the Annual Income 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; and ICTaEH 6) BIR Certificate of Registration. 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