Victory Christian Fellowship of Pangasinan, Inc.

March 7, 2019 BIR RULING NO. 216-19 Section 30 (E) of the NIRC of 1997, as amended; RMO No. 20-2013; RMC No. 051-14; BIR Ruling No. 466-2014 Victory Christian Fellowship of Pangasinan, Inc. 1 Ground Floor, East Gate Plaza, A B Fernandez Avenue, Dagupan City, Pangasinan 2400 Attention: AAA _______________ Gentlemen : This refers to your letter dated April 3, 2017, as indorsed by the Regional Director, Revenue Region No. 1, Calasiao, Pangasinan, through 2nd Indorsement dated January 4, 2018, requesting on behalf of VICTORY CHRISTIAN FELLOWSHIP OF PANGASINAN, INC. for tax exemption certificate being enjoyed by non-stock, non-profit corporation or association under Section 30 (E) of the National Internal Revenue Code (NIRC) of 1997, as amended. It is represented that VICTORY CHRISTIAN FELLOWSHIP OF PANGASINAN, INC. with BIR Taxpayer's Identification No. (TIN) 000-000-000-000 and Certificate of Registration No. OCN 4RC0001016478 dated July 27, 2009, is a non-stock, non-profit association duly organized and existing under the laws of the Republic of the Philippines; that it is registered with the Securities and Exchange Commission (SEC) under Company Registration No. CN200909568; and that the purposes 2 for which the association was incorporated is for the administration and management of its secular affairs, properties and temporalities . In reply, please be informed that Section 30 of the National Internal Revenue Code of 1997, as amended, enumerates the non-stock and/or non-profit, corporations/associations/organizations that are exempt from income tax in respect to income received by them as such. Section 30 (E) of the National Internal Revenue Code of 1997, as amended, provides, viz .: "Sec. 30. Exemptions from Tax on Corporations. The following organizations shall not be taxed under this Title in respect to income received by them as such: xxx xxx xxx (E) Non-stock corporation or association organized and operated exclusively for religious, charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans, no part of its net income or asset shall belong to or inure to the benefit of any member, organizer, officer or any specific person;" xxx xxx xxx" "Non-stock" means "no part of its income is distributable as dividends to its members, trustees, or officers" and that any profit "obtained as an incident to its operations shall, whenever necessary or proper, be used for the furtherance of the purpose or purposes for which the corporation was organized." 3 "Non-profit" means that "no net income or asset accrues to or benefits any member or specific person, with all the net income or asset devoted to the institution's purposes and all its activities conducted not for profit" . 4 Revenue Memorandum Circular (RMC) No. 51-2014 has clarified that in order for an entity to qualify as a non-stock and/or non-profit corporation/association/organization exempt from income tax under Section 30 of the National Internal Revenue Code, as amended, its earnings or assets shall not inure to the benefit of any of its trustees, organizers, officers, members or any specific person. The following are considered "inurements" of such nature: aScITE 1. The payment of compensation, salaries, or honorarium to its trustees or organizers; x x x . In the submitted documents of VICTORY CHRISTIAN FELLOWSHIP OF PANGASINAN, INC. , it was disclosed that Board of Trustees are entitled to allowance. Section 4 of Article VI of the By-Laws of VICTORY CHRISTIAN FELLOWSHIP OF PANGASINAN, INC. , states that: "Section 4. Remuneration. The members of the council are not entitled to receive salaries from the society. However, whenever the funds of the society may so permit the members of the council may be allowed to receive reasonable allowance as may be approved by majority of the members for the individual sustenance and that of their respective family, and token gifts whether in cash or in kind from the society as expression of their voluntary service. The members of the Council may likewise be permitted to solicit and receive benevolent donation from the organization and private individuals ." The giving of allowances to the members of Council is considered a distribution of the equity (including the net income) of VICTORY CHRISTIAN FELLOWSHIP OF PANGASINAN, INC. This is a form of private inurement which the law prohibits in the organization and operation of a non-stock, non-profit corporation. This act violates the requirement that no part of the net income or assets of the corporation shall inure to the benefit of any individual or specific person. Thus, VICTORY CHRISTIAN FELLOWSHIP OF PANGASINAN, INC. cannot be qualified as a non-stock, non-profit corporation under Section 30 (E) of the National Internal Revenue Code of 1997, as amended. Please bear in mind that, "being a non-stock and/or non-profit corporation does not, by this reason alone, completely exempt an institution from tax." 5 Thus, "statutes granting tax exemptions are construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority. A claim of tax exemption must be clearly shown and based on language in law too plain to be mistaken. Otherwise stated, taxation is the rule, exemption is the exception. The burden of proof rests upon the party claiming the exemption to prove that it is in fact covered by the exemption so claimed." 6 (BIR Ruling No. 466-2014 dated November 19, 2014) In view of the foregoing, the request of VICTORY CHRISTIAN FELLOWSHIP OF PANGASINAN, INC. to be exempted from income tax on its income as a Section 30 (E) corporation is hereby denied as it failed to prove that it is a non-profit corporation. Therefore, VICTORY CHRISTIAN FELLOWSHIP OF PANGASINAN, INC. shall be treated as an ordinary corporation subject to thirty percent (30%) income tax rate pursuant to Section 27 (A) and other internal revenue taxes imposed by the National Internal Revenue Code of 1997, as amended. Please be guided accordingly. HEITAD Very truly yours, (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue Footnotes 1. Formerly: Victory Christian of Dagupan, Inc. 2. Articles of Incorporation adopted on February 16, 2010. 3. Section 87, Corporation Code. 4. CIR vs. St. Luke's Medical Center, Inc. , G.R. Nos. 195909 and 195960 dated 26 September 2012. 5. CIR vs. St. Luke's Medical Center, Inc. [G.R. No. 195909 & G.R. No. 195960, 26 September 2012]. 6. Quezon City and The City Treasurer of Quezon City vs. ABS-CBN Broadcasting Corporation [G.R. No. 166408, 6 October 2008].