BIR Ruling No. 309-11

August 22, 2011 BIR RULING NO. 309-11 RA 10073; BIR Ruling No. [NSNP-(S30E-159)810-09]; and BIR Ruling No. DA-457-99; 000-00 March 29, 2011 Girl Scouts of the Philippines National Headquarters, 901 Padre Faura Street 1000 Ermita, Manila Attention: Salud A. Bagalso, M.D. National President Gentlemen : This refers to your letter dated June 21, 2010 requesting for a certificate of tax exemption pursuant to Section 11 of Republic Act (RA) No. 10073, entitled as "An Act Instituting the New Girl Scouts of the Philippines Charter, Penalizing Violations Thereof and for Other Purposes". It is represented that on April 20, 2010, President Gloria Macapagal Arroyo has signed into law RA No. 10073, otherwise known as "The Girl Scouts of the Philippines Charter of 2009". One of the provisions of the law is the entitlement of the Girls Scouts of the Philippines (GSP) to Tax and Duty Incentives and Privileges as stated under Section 11, to wit: "SEC. 11. Fiscal Incentives. all provisions of law to the contrary notwithstanding, the GSP shall be entitled to the following tax and duty incentives and privileges: a) Exemption from all direct and indirect taxes, including value-added tax (VAT) fees and other charges of all kinds on all income derived from its operations, including the use, lease or sale of its real properties and the provision of services; b) Exemption from direct and indirect taxes, including vat duties, fees and other charges on importations and purchases for its exclusive use; c) Tax and/or duty exemption of donations from foreign countries as provided under relevant laws such as, but not limited to, Section 105 of the Tariff and Customs Code of the Philippines, as amended, and Section 109(K) of the National Internal Revenue Code (NIRC) of 1997, as amended. CHIScD Likewise, all donations, legacies and gifts to the GSP to support its purposes and objectives as embodied in this Act shall, under Section 101(A)(3) of the NIRC of 1997, as amended, be exempt from donor's tax and shall be deductible from the gross income of the donor for income tax purposes, and such donations, legacies and gifts shall be expended by the Central Board in pursuance of this Act. The GSP shall likewise be exempt from payment of all taxes, duties, imposts and charges; and d) Exemption from payment of real property taxes on all real properties owned by it." In view thereof, this Office hereby rules as follows: I. GSP shall be exempt from all direct and indirect taxes (VAT and Income) derived from its operations. Section 11 (a) of R.A. No. 10073 exempts the Girl Scouts of the Philippines from all direct and indirect taxes, including value-added tax (VAT) fees and other charges of all kinds on all income derived from its operations, including the use, lease or sale of its real properties and the provision of services. The afore-quoted provision of R.A. No. 10073 provides only the exemption from income tax and VAT derived from its operations. Therefore, GSP is still liable to passive income tax provided in Section 27 (D) (1) (2) (3) of the NIRC of 1997, e.i. , (1) interest income from deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements, and royalties; (2) capital gains from the sale of shares of stock not traded in the stock exchange, and (3) income derived under the expanded foreign currency deposit system. II. GSP shall be exempt from direct and indirect taxes, including VAT on importations and purchases for its exclusive use. Section 11 (b) of R.A. No. 10073 exempts the GSP from the payment of VAT and excise taxes on importations and purchase, provided, that said importations and purchases made are for the exclusive use of GSP in its operations as provided in its charter. III. Local and foreign donations, legacies and gifts made to GSP shall be exempt from donor's tax and such donations shall be deductible from the gross income of the donor. Second paragraph of Section 11 (c) of R.A. No. 10073 exempts from donor's tax all donations, legacies and gifts in favor of GSP as provided in Section 101 (A) (3) of the NIRC of 1997 provided however, that not more than thirty percent (30%) of the said gifts shall be used by GSP for administration purposes. Moreover, the donor may claim the donation made as a deduction from gross income pursuant to Section 34 (H) (2) (C) of the NIRC. IV. GSP shall be constituted as withholding agent for the government and 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. Finally, it should be understood that the said exempt corporation/association shall be constituted as withholding agent for the government if it acts as an employer and its employees receive compensation income subject to the withholding tax under Section 79 (A), Chapter XIII, Title II of the NIRC 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 withholding tax pursuant to Section 57 of the NIRC of 1997, also implemented by Revenue Regulations No. 2-98, as amended. (BIR Ruling No. [NSNP-(S30E-159)810-09] dated December 22, 2009) . TEDHaA Under Section 235 of the NIRC 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 organization 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. 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. DA-457-99 dated August 11, 1999) It is requested that a copy of this letter of exemption be attached to the aforementioned Annual Information Return. Please be guided accordingly. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue