BIR Ruling No. 426-11

November 4, 2011 BIR RULING NO. 426-11 Sections 5 (c) and 6 of Republic Act No. 10072 (Philippine Red Cross Act of 2009) Deutsche Bank AG Manila 26th Floor, Tower One & Exchange Plaza Ayala Triangle, Ayala Avenue, 1226 Makati City, Philippines Attention: Ma. Teresa R. Toledo Head, Institutional Sales and Paulino G. Erjas Head, Trust Operations Gentlemen : This refers to your letter dated 10 April 2011 requesting for a confirmatory ruling on the following opinions: 1. PNRC is tax-exempt for purposes of investing in the SDA Facility of BSP; and 2. All income and/or interest derived from the SDA placements are exempt from any and all taxes. It is represented that Philippine National Red Cross (PNRC) has an existing trust account with Deutsche Bank AG Manila. In reply please be informed that it is a principle in taxation that tax exemptions must be clear and unequivocal. A taxpayer claiming a tax exemption must point to a specific provision of law conferring on the taxpayer, in clear and plain terms, exemption from a common burden. Any doubt whether a tax exemption exists is resolved against the taxpayer. ( PLDT vs. City of Davao, et al., G.R. No. 143867 dated March 25, 2003) Section 5 (c) of Republic Act (R.A.) No. 10072 "The Philippine Red Cross Act of 2009" provides as follows: EaHDcS "Section 5. Privileges. To allow it to fully realize its mandate under the Geneva Conventions, the Statues of the International Red Cross and Red Crescent Movement and its Act, the Philippine Red Cross shall: . . . (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 importations and purchases for its exclusive use. Likewise, all donations, legacies and gifts made to the Philippine Red Cross to support its purposes and objectives shall be exempt from the donor's tax and shall be deductible from the gross income of the donor for income tax purposes or from the computation of the donor-decedent's net estate as a transfer for public use for estate tax purposes. Finally, the Philippine Red Cross shall be exempt from the payment of real property taxes on all real properties owned by it; . . ." (emphasis supplied) Investing in the said SDA Facility of BSP does not constitute a part of PNRC's operations, which is defined in its list of Purposes in RA 10072, to wit: "Section 4. Purposes. The purposes of the Philippine Red Cross shall be as follows: (a) To cooperate with public authorities in the prevention of disease, the promotion of health and the mitigation of human suffering by their own programs in such fields as education, health and social welfare, for the benefit of the community; (b) To organize, in liaison with public authorities, emergency relief operations and other services to assist the sick and wounded of armed forces in time of armed conflict, 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; (c) For the purposes mentioned in the preceding paragraphs, to perform all duties devolving upon the Philippine Red Cross as a result of the adherence of the Republic of the Philippines to the said Convention; EcIDaA (d) To act in matters of voluntary relief and of communication between the people of the Republic of the Philippines and their Armed Forces, in time of peace and in time of armed conflict and to act in such matters between similar national societies of other countries and the Governments and people and the Armed Forces of the Republic of the Philippines; (e) To establish and maintain a system of national and international relief in time of peace and in time of armed conflict and apply the same in meeting emergency needs caused by typhoons, floods, fires, earthquakes, and other natural or man-made disasters, and to devise and carry on measures for alleviating the suffering caused by such disasters; (f) To devise and promote such other services in time of peace and in time of armed conflict as may be found desirable in improving the health, safety and welfare of the Filipino people, and of all peoples in general; and (g) To devise such means as to make every citizen and/or resident of the Philippines a member of the Philippine Red Cross." Based on the foregoing, PNRC is only exempt from all direct and indirect taxes derived from its operations. Therefore, PNRC is still liable to passive income tax provided in the tax Code, as amended. Hence, PNRC's income derived from investing in the SDA Facility of BSP is NOT exempt from tax. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue