BIR Ruling No. 377-15

October 29, 2015 BIR RULING NO. 377-15 Section 30 of the Tax Code of 1997, as amended; RMO No. 14-2001; RMC No. 76-2003; BIR Ruling No. 121-2013; BIR Ruling No. 577-2012; BIR Ruling No. 536-2012 Fellowship of Yehsua the True Messiah, Inc. 8098 A, Purok 8, Kias Baguio City 2600 Attention: Rogelio G. Santiago President Gentlemen : This refers to your letter dated 4 June 2013 forwarded by Revenue Region No. 2, Cordillera Administrative Region, Baguio City requesting for the issuance of a Certificate of Tax Exemption. It is represented that FELLOWSHIP OF YEHSUA THE TRUE MESSIAH, INC. with Taxpayer Identification No. (TIN) 431-498-021-000, is a non-stock, non-profit corporation or association organized and operated exclusively for religious purposes and duly organized under the laws of the Philippines; that it is registered with the Securities and Exchange Commission (SEC) under Registration No. CN201132867 dated 2 November 2011; and that the purpose for which FELLOWSHIP OF YEHSUA THE TRUE MESSIAH, INC. is incorporated are to "spread the eternal Good News in all the world. To glorify God the Heavenly Father and his beloved son YEHSUA, the true messiah and to conduct bible studies inside the residence of interested ones" and for the administration of its affairs, properties and temporalities. In reply, please be informed that the application for tax exemption cannot be granted for lack of factual and legal basis. FELLOWSHIP OF YEHSUA THE TRUE MESSIAH, INC. has to prove by actual operation for at least three (3) years that it is really an organization/association exempt from income tax under Section 30 of the Tax Code of 1997, as amended. The submitted documents, composed of the SEC Certificate of Registration, Articles of Incorporation and By-laws, and BIR Certificate of Registration are insufficient to prove that FELLOWSHIP OF YEHSUA THE TRUE MESSIAH, INC. is a corporation exempt from income tax under Section 30 of the Tax Code of 1997, as amended. Being a non-stock and non-profit corporation does not, by this reason alone, completely exempt an institution from tax. 1 It is a governing principle in taxation that tax exemptions are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. The basic principle in the construction of laws granting tax exemptions has been very stable. He who claims an exemption from his share of the common burden of taxation must justify his claim by showing that the Legislature intended to exempt him by words too plain to be beyond doubt or mistake. 2 (BIR Ruling No. 121-13 dated March 22, 2013) FELLOWSHIP OF YEHSUA THE TRUE MESSIAH, INC. shall 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. CAIHTE Hence, FELLOWSHIP OF YEHSUA THE TRUE MESSIAH, 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. 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. It should be understood that FELLOWSHIP OF YEHSUA THE TRUE MESSIAH, INC. 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. 577-2012 dated September 9, 2012 and BIR Ruling No. 536-2012 dated August 8, 2012) 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 tax exemption ruling after the three (3)-year period, FELLOWSHIP OF YEHSUA THE TRUE MESSIAH, INC. shall file its application for Tax Exemption with the Revenue District Office (RDO) where it is registered and it is required to submit the following documents pursuant to Revenue Memorandum Order No. 20-2013: 1) Original copy of application letter for issuance of Tax Exemption Ruling. The letter shall cite the particular paragraph of Section 30 of the NIRC, as amended, under which the application for exemption/revalidation is being based; 2) Certified true copy of the Certificate of Incorporation, latest Articles of Incorporation and By-Laws issued by the Securities and Exchange Commission; DETACa 3) Original copy of Certification under Oath by an executive officer of the corporation or association as to: 1) all previous amendments/changes in the Articles of Incorporation and By-Laws; 2) manner of activities; and 3) the sources and disposition of income, if any, of the subject corporation or association. If there are no amendments/changes, the Certification shall state this fact. 4) Certified true copy of the Certificate of Registration with the BIR; 5) Original copy of the Certification under Oath by the Treasurer of the corporation or association as to the amount of income, compensation, salaries or any emoluments paid by the corporation or association to its trustees, officers and other executive officers. Provided, that, a corporation sole, which, by its nature, does not have trustees, corporate officers or executive officers need not submit the certification required under this subparagraph; 6) Original copy of the Certification issued by the RDO where the corporation or association is registered that the corporation or association is not the subject of any pending investigation, on-going audit, pending tax assessments, administrative protest, claim for refund or issuance of tax credit certificate, collection proceedings, or judicial appeal; or if thereby any, the Original copy of the Certification issued by the RDO on the status thereof; 7) Certified true copies of the Income Tax Returns or Annual Information Returns and Financial Statements of the corporation or association for the last three (3) years; and 8) Original copy of a statement under Oath by an executive officer of the corporation or association as to its modus operandi which shall include: i) A full description of the past, present, and proposed activities of the corporation or association; ii) A narrative description of anticipated receipts and contemplated expenditures; and iii) A detailed description of all revenues which it seeks to be exempted from income tax. All other revenues which are not included in the statement/application shall be subject to income tax. Please be guided accordingly. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Commissioner of Internal Revenue vs. St. Luke's Medical Center, Inc. [G.R. No. 195909 & G.R. No. 195960, 26 September 2012]. 2. City of Iloilo, et al. vs. Smart Communications, Inc. , G.R. No. 167260 dated February 27, 2009.