BIR Ruling No. 425-12

June 25, 2012 BIR RULING NO. 425-12 Tax Code of 1997, Section 27 (D) (1); City of Iloilo, et al. vs. Smart Communications, Inc., G.R. No. 167260 Upper Zayas Landless Association, Incorporated Zone 12-C Upper Dagong Cagayan de Oro City 9000 Attention: Mr. Francisco B. Tenio Sr. President Gentlemen : This refers to your letter dated March 14, 2012 requesting on behalf of Upper Zayas Landless Association, Incorporated ("UZLAI") the issuance of a certificate of tax exemption enjoyed by non-stock corporation or association organized and operated exclusively for purposes under Section 30 of the Tax Code of 1997, as amended. It is represented that UZLAI, with Taxpayer's Identification No. 005-895-872-000, 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 SEC Registration No. H200200162; and that the purposes, among others, for which it was incorporated, are the following: a. To deal with any person, private or public, for and in behalf of its members regarding residential home acquisition; b. To acquire and own in its own name personal and real properties, particularly residential lands; c. To enter into contract, agreement, negotiation with any person, natural or juridical; including government offices on matter relating to acquisition and financing of residential lands intended for subdivision and distribution to its members, and for possible community housing loan with any financial institution, private or public, or real estate developer; d. To initiate and undertake project which will promote the socio-economic condition of its members; and aEDCAH e. To undertake continuing educational program for its members to make them responsible members of the association and of the community. In reply, please be informed that Section 30 of the 1997 Tax Code, as amended, enumerates the organizations which are exempt from income tax as follows: "SEC. 30. Exemptions from Tax on Corporations . The following organizations shall not be taxed under this Title in respect to income received by them as such: (A) Labor, agricultural or horticultural organization not organized principally for profit; (B) Mutual savings bank not having a capital stock represented by shares, and cooperative bank without capital stock organized and operated for mutual purposes and without profit; (C) A beneficiary society, order or association, operating for the exclusive benefit of the members such as a fraternal organization operating under the lodge system, or mutual aid association or a non-stock corporation organized by employees providing for the payment of life, sickness, accident, or other benefits exclusively to the members of such society, order, or association, or non-stock corporation or their dependents; (D) Cemetery company owned and operated exclusively for the benefit of its members; (E) Non-stock corporation or association organized and operated exclusively for religious, charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans, no part of its net income or asset shall belong to or inures to the benefit of any member, organizer, officer or any specific person; (F) Business league chamber of commerce, or board of trade, not organized for profit and no part of the net income of which inures to the benefit of any private stock-holder, or individual; (G) Civic league or organization not organized for profit but operated exclusively for the promotion of social welfare; (H) A non-stock and non-profit educational institution; (I) Government educational institution; (J) Farmer's or other mutual typhoon or fire insurance company, mutual ditch or irrigation company, mutual or cooperative telephone company, or like organization of a purely local character, the income of which consists solely of assessments, dues, and fees collected from members for the sole purpose of meeting its expenses; and HcISTE (K) Farmers', fruit growers', or like association organized and operated as a sales agent for the purpose of marketing the products of its members and turning back to them the proceeds of sales, less the necessary selling expenses on the basis of the quantity of produce finished by them; xxx xxx xxx" Further review of the documents submitted reveals that UZLAI, is a corporation doing real estate business, which does not fall under any of the organizations exempt from income tax as contemplated under Section 30 of the Tax Code of 1997, as amended. It is a governing principle in taxation that tax exemptions must be 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 ( City of Iloilo, et al. vs. Smart Communications, Inc., G.R. No. 167260 , dated February 27, 2009). Accordingly, your request for exemption from income tax is hereby denied for lack of legal basis. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue