BIR Ruling No. 415-15

December 14, 2015 BIR RULING NO. 415-15 RA No. 95; RA 1264 & RA 10072 Deutsche Bank AG Manila 26th Floor, Tower One & Exchange Plaza Ayala Triangle, Ayala Avenue 1226 Makati City Attention: Frederico Rafael D. Ocampo Chief Investment Officer Jean D. De Castro Portfolio Manager Gentlemen : This refers to your (two) letters, dated April 10, 2011 and September 21, 2011, respectively, requesting on behalf of the Philippine National Red Cross ("PNRC") a confirmatory ruling on the following: 1. BIR Ruling No. 014-99 and the tax exemption privileges of PNRC are still valid and subsisting; 2. The tax exemption from 20% final tax on interest income provided in BIR Ruling No. 014-99 applies to interests on placements in the Special Deposit Account (SDA) facility of the Bangko Sentral ng Pilipinas (BSP). Background: PNRC, which was chartered and organized in 1947 through Republic Act (RA) No. 95 , as amended, is the premiere humanitarian organization in the country, the main objectives of which are the following: (a) To provide volunteer aid to the sick and wounded of armed forces in time of war, in accordance with the spirit of and under the conditions prescribed by the Geneva Conventions to which the Republic of the Philippines proclaimed its adherence; (b) For the purposes mentioned in the preceding sub-section, to perform all duties devolving upon the Corporation as a result of the adherence of the Republic of the Philippines to the said Convention; (c) To act in matters of voluntary relief and in accordance with the authorities of the armed forces as a medium of communication between people of the Republic of the Philippines and their Armed Forces, in time of peace and in time of war, and to act in such matters between similar national societies of other governments and the Governments and people and the Armed Forces of the Republic of the Philippines; (d) To establish and maintain a system of national and international relief in time of peace and in time of war and apply the same in meeting and emergency needs caused by typhoons, flood, fires, earthquakes, and other natural disasters and to devise and carry on measures for minimizing the suffering caused by such disasters; and (e) To devise such means as to make every citizen and/or resident of the Philippines a member of the Red Cross. CAIHTES The PNRC, as a national voluntary organization, is being financed primarily by contributions/donations obtained through personal solicitation campaigns organized by the Board of Governors and conducted by the Chapters in their respective jurisdictions. Relative thereto, this Office issued BIR Ruling No. 014-99 dated February 1, 1999 confirming the exemption of the PNRC from the payment of the following taxes: 1. VAT on its importation of goods under Section 107 of the 1997 Tax Code; 2. VAT on the PNRC's local purchases of goods or properties, services and use or lease of properties under Section 109 (q) of the 1997 Tax Code; and 3. Twenty percent (20%) final tax imposed under Section 27 (D) (1) of the Tax Code of 1997 on interest income derived by PNRC from its currency bank deposits and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements. In reply, please be informed that Section 4 of RA No. 95 , as amended by Presidential Decree (PD) 1264 , provides for the tax incentives which may be availed of by the PNRC, to wit: "Section 4. In furtherance of the purposes mentioned in the preceding sub-paragraphs, the Philippine National Red Cross shall: xxx xxx xxx b. Be exempt from payment of all duties, taxes, fees, and other charges of all kinds on all importations and purchases for its exclusive use, on donations for its disaster relief work and other Red Cross services, and in its benefits and fund raising drives all provisions of law to the contrary notwithstanding." (Emphasis supplied) CAIHTE Moreover, the tax exemption privileges of PNRC have been reiterated by the enactment of Republic Act (RA) 10072, which took effect on June 8, 2010. Section 5 of the said law provides, viz. : "SEC. 5. Privileges. To allow it to fully realize its mandate under the Geneva Conventions, the Statutes of the International Red Cross and Red Crescent Movement and this Act, the Philippine Red Cross shall: xxx xxx xxx (c) Be exempt from payment of all direct and indirect taxes , all provisions of law to the contrary notwithstanding, including value-added tax (VAT), fees and other charges of all kinds on all income from its operations , including the use, lease or sale of its real property, and provision of services. The Philippine Red Cross shall also be exempt from direct and indirect taxes, including VAT, duties, fees and other charges on importation and purchases for its exclusive use. xxx xxx xxx" (underscoring supplied) However, it is noteworthy that the tax exemption of PNRC as provided in the immediately above-quoted provision is more restricted than the tax exemption provided under PD 1264. While the tax exemption of PNRC under PD 1264 seems to be all encompassing, the exemption of PNRC as provided under RA 10072 is limited only to direct and indirect taxes on all income derived by PNRC from its operations . Based on the foregoing, the interest income derived by PNRC from its currency bank deposits and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements, including the Special Deposit Account (SDA) facility of the Bangko Sentral ng Pilipinas, not being derived from its operations, is not covered by the tax exemption provided under RA 10072. However, PNRC is still exempt from VAT on its importation and local purchases of goods, properties, services and use or lease of properties pursuant to Section 5 (c) of RA 10072. In fine, this Office holds that BIR Ruling No. 014-99 is hereby revoked insofar as it exempts PNRC from 20% final tax on its interest income from currency bank deposits and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements. However, the said ruling is still valid and subsisting in so far as it exempts PNRC from VAT on its importation and local purchases of goods, properties, services and use or lease of properties. Please be guided accordingly. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue