Applicability of Sec. 46(c) of the Tax Code, as amended by EO 1026, to the First Pacific Corp.

November 10, 1986 BIR RULING NO. 242-86 46 (c) 051-86 242-86 Gentlemen : This refers to your letter dated November 7 and 14, 1985 requesting a ruling on whether Section 46(c) of the Tax Code, as amended by Executive Order No. 1026, applies to the First Pacific Corporation (FPC) which has not formally organized and commenced transaction of its business within two years from incorporation. cdti It is represented that FPC is a corporation incorporated in February of 1958 as per records at the Securities and Exchange Commission; that it failed to file its By-Laws within the required period of one month from incorporation as well as the necessary financial statements for the years ended June 30, 1958, 1959, 1960, 1961, 1962, 1963, 1964, 1965, 1967; that a notice dated February 26, 1968 of FPC's failure to file said financial statements was issued by the Securities and Exchange Commission; that your interest in the matter stems from the fact that your client, First Pacific International Export Corporation (FPIEC) is a corporation registered with the Securities and Exchange Commission; that you now would like to have SEC cancel the registration of FPC considering the fact that it has never been engaged in business and that it would create confusion in relation to clients dealing with FPIEC, since the two corporations have almost identical names. Section 46(c) of the Tax Code as amended by Executive Order No. 1026 provides: "(c) Return of corporation contemplating dissolution. Every corporation shall within thirty days after the adoption by the corporation of a resolution or plan for the dissolution of the corporation or for the liquidation of the whole or any part of its capital stock, including corporations which have been notified of possible involuntary dissolution by the Securities and Exchange Commission, render a correct return to the Commissioner, of Internal Revenue, verified under oath, setting forth the terms of such resolution or plan and such other information as the Minister of Finance shall, by regulations, prescribe. The dissolving corporation prior to the issuance of the Certificate of Dissolution by the Securities and Exchange Commission shall secure a certificate of tax clearance from the Bureau of Internal Revenue which certificate shall be submitted to the Securities and Exchange Commission ." (Emphasis ours). In reply, I have the honor to inform you that, under the above quoted provision, the certificate of tax clearance is required in cases of corporations which are already organized but are contemplating dissolution, either voluntarily or involuntarily. In fact, it is also provided that "corporations and partnerships contemplating dissolution must notify the Commissioner and shall not be dissolved until cleared of any tax liability." (Sec. 275, Tax Code). Accordingly, a corporation whose corporate powers cease and are deemed dissolved because it was not formally organized and did not commence the transaction of its business within two (2) years from its corporation (Sec. 22, Corporation Code of the Philippines) need not secure a certificate of tax clearance. In view thereof, if as represented, FPC was deemed dissolved, it need not secure a certificate of tax clearance from this Office. cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner of Internal Revenue