BIR Ruling No. 356-11

September 28, 2011 BIR RULING NO. 356-11 Section 30 (G) of the Tax Code of 1997; BIR Ruling No. 015-95; BIR Ruling No. DA-252-99; BIR Ruling No. [NSNP-(S30G-016) 125-09] Camalig Bank Foundation, Inc. Rizal Street, Camalig Albay 4502 Attention: Johanna B. Monis Corporate Secretary Gentlemen : This refers to your letter dated August 17, 2010 received via endorsement from Revenue Region No. 10, Legazpi City, dated August 31, 2010, requesting for the issuance of a Certificate of Tax Exemption enjoyed by a civic league or organization not organized for profit but operated exclusively for the promotion of social welfare pursuant to Section 30 (G) of the Tax Code of 1997, as amended. It is represented that Camalig Bank Foundation, Inc. with Taxpayer's Identification No. 284-348-745, 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. CN200930455 and with SEC Certificate of Incorporation dated September 1, 2009; and that the purposes for which it was incorporated are the following: 1) To establish and manage a private, non-profit foundation which shall initiate, promote, develop, support, finance, administer, operate and/or maintain programs or projects for capacity building in the areas of financial literacy and disaster preparedness for the promotion of social welfare; 2) To initiate, promote and develop programs that will enhance financial literacy through seminars, trainings, workshops, and research; 3) To assist in promoting enterprises that will make families and communities self-sustaining and profitable; 4) To promote awareness on natural and man-made calamities as well as encourage disaster preparedness and mitigation measures; 5) To carry out projects in support of education such as the granting of scholarships to deserving students, the operation, maintenance and the giving of assistance to educational institutions including establishment and operation for the promotion of training and educational programs and other similar projects; 6) To build, improve, establish Training Center/s that will support the Foundation's undertakings and programs on financial literacy and disaster preparedness; 7) To develop, encourage, support, finance or embark on programs and projects for charitable purposes and for the social and economic upliftment of the less privileged; 8) To accept and receive assistance, gifts, donations, bequests, legacies, devises or endowments from individual corporations or other persons or entities, domestic or foreign; 9) To acquire, take and hold property, real or personal, donated, devised or bequeathed to the Foundation, including those that may be given in trust for specific purposes and under certain conditions; 10) To raise money or funds from time to time, without limit as to amount, to finance the purposes for which the Foundation is organized; to borrow money, and to secure the payment thereof and of the interest thereon by way of mortgage, pledge, conveyance or assignment in trust of the assets of the Foundation, real or personal; 11) To purchase, or otherwise acquire, own, hold, pledge, mortgage, assign, sell, transfer, convey, real or personal property of every kind and description or any interest therein as may be necessary to carry out its purposes; 12) To make any guaranty respecting securities indebtedness, dividends, interests, contracts or other obligations so far as the same may be permitted to be done under the laws of the Philippines and only so far as the same is necessary to carry out its purposes; 13) To enter into, make, perform and carry out or cancel and rescind contracts of every kind and for a lawful purpose with any person or firm, association, corporation, or syndicate, whether domestic or foreign; and 14) In general, to carry on any activity, to do and to perform all acts and things necessary, suitable, or proper for the accomplishment of any of the purposes herein enumerated or which shall any time appear for the best interest and benefit of the foundation in the furtherance of its objectives, including all powers, authorities and attributes confined by law to any juridical persons as principal, agent or otherwise, either alone or in syndicate or otherwise in conjunction with any person, association or entity, domestic or foreign, and to establish and maintain branches, offices, agencies here or abroad. In reply, please be informed that this Office cannot as yet issue the requested certificate of tax exemption because Camalig Bank Foundation, Inc. has to prove by actual operation for at least three (3) years that it is really an organization exempt from income tax under Section 30 (G) of the Tax Code of 1997, as amended. Camalig Bank Foundation, Inc. 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. (BIR Ruling No. DA-252-99 dated April 23, 1999) However, Camalig Bank Foundation, Inc. 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. (BIR Ruling No. 015-95 dated February 9, 1995) 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. [NSNP-(S30G-016) 125-09] dated February 24, 2009) It should be understood that the said exempt organization 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. DA-252-99 dated April 23, 1999) . 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. 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, Camalig Bank Foundation, Inc. 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 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 copy of the Annual Information 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 6. BIR Certificate of Registration; 7. Verification and Certificate of Non-Forum shopping. 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