BIR Ruling No. 406-11

October 25, 2011 BIR RULING NO. 406-11 Tax Code, Sections 27 (D) (1), 30 (C); 105; RR No. 02-40; BIR Ruling No. S30-047-01 International Association of Women in Radio and Television, (IAWRT) Inc. 3/F GIF Medical Building, 510 C. Raymundo Avenue Caniogan, Pasig City Attention: Elizabeth Roxas Head, IAWRT Secretariat Gentlemen : This refers to your letter dated July 11, 2011 requesting on behalf of International Association of Women in Radio and Television, (IAWRT) Inc. for tax exemption privileges pursuant to Section 30 (C) of the Tax Code of 1997, as amended. It is represented that IAWRT, with Taxpayer's Identification No. 007-741-427-000, 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) bearing Registration No. CN201006383; and that the primary purpose for which it was incorporated is to promote the entry, development and advancement of women working in the media in order to broaden their perspectives and raise the quality of radio and television programmes by: a. supporting the professional development of members through exchange of ideas, experience and technical knowledge; b. raising awareness of the privilege of free speech and of the responsibility it entails in the profession; c. utilizing media skills to ensure that the points of view of women are respected and their needs are recognized; d. utilizing member access to media in support of women in developing countries; and TSHcIa e. supporting the full integration of women within all areas of society. In reply, please be informed that this Office cannot as yet issue the requested certificate of tax exemption because IAWRT 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 (C) of the Tax Code of 1997, as amended. IAWRT can file the necessary annual information return instead of an income tax return on or before the 15th day of the fourth month of the preceding accounting period following the start of its operation as an exempt organization 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. However, IAWRT 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 IAWRT 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. S30-047-01 dated June 5, 2001). CDAHaE 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. Finally, 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]. For purposes of securing a permanent exemption after the three (3)-year period, IAWRT 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; HIEASa 4) Certification under oath that there has not been any change in the Articles of Incorporation and/or By-laws; 5) Certified true copy of the Annual Information Returns and Financial Statements for the last three (3) years of operation; and 6) BIR Certificate of Registration. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. IAEcCa Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue