BIR Ruling No. 228-14

June 25, 2014 BIR RULING NO. 228-14 GS1 Philippines, Inc. 20 San Rafael St., Bo. Kapitolyo Pasig City Attention: Jose A. Albert CEO/President Gentlemen : This refers to your letter dated November 4, 2013 requesting for confirmation of the tax exemption of GS1 Philippines, Inc. as a nonstock, nonprofit corporation under Section 30 (F) of the National Internal Revenue Code of 1997, as amended (NIRC). HAICET It is represented that GS1 Philippines, Inc. is a nonstock nonprofit corporation duly registered with the Securities and Exchange Commission. The primary purposes of GS1 Philippines, Inc. are (1) to establish and promote an international multi-industry system of identification and communication for products and services based on accepted standards, for the benefit and more efficient operation of the manufacturing, wholesale, retail industries and other segments of the economy; (2) to determine what Article Numbering System should be adopted and to ensure that the system is compatible with existing international article numbering systems; (3) to control, coordinate and administer the introduction and use of the Article Numbering System in the Philippines; (4) to raise and receive contributions for the attainment of its objective; and (5) to perform other tasks in the legal pursuit of its purpose. A business league is an association of persons having a common business interest. Its activities must be directed to the improvement of business conditions of one or more lines of business as distinguished from the performance of particular services for individual persons. Its purpose must not be to engage in a regular business of a kind ordinarily carried on for profit. Moreover, it must be primarily engaged in activities or functions constituting the basis for its exemption and that its primary activity cannot be performing particular services for members or nonmembers. Along with police power and eminent domain, taxation is one of the three basic and necessary attributes of sovereignty. Thus, the State cannot be deprived of this most essential power and attribute of sovereignty by vague implications of law. Rather, being derogatory of sovereignty, the governing principle is that tax exemptions are to be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority; and he who claims an exemption must be able to justify his claim by the clearest grant of statute. In case of doubt, non-exemption must be favored. Taxes being the lifeblood of the government that should be collected without unnecessary hindrance, every precaution must be taken not to unduly suppress it. (BIR Ruling No. 310-2011 dated August 22, 2011) A review of the documents submitted in support of the request shows that the primary activity of GS1 Philippines, Inc. is the performance of particular services for members or nonmembers. Its financial statements reveal that it raises revenues from services it renders. Such activity is of a kind ordinarily carried on for profit. Lastly, GS1 Philippines, Inc. is a value-added-tax-registered taxpayer and its financial statements reveal that it recognizes VAT on its sales and purchases. VAT is a business tax imposed primarily on those taxpayers engaged in business. This further proves that it is an entity engaged in business by rendering services to members and nonmembers. IN VIEW OF THE FOREGOING, this Office is of the opinion that GS1 Philippines, Inc. does not qualify for exemption under Section 30 (F) of the NIRC. It is therefore liable for income taxes imposed under Title II of the NIRC. AHaETS Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue