BIR Ruling No. 446-14

October 30, 2014 BIR RULING NO. 446-14 Section 30 (F) of the Tax Code of 1997; BIR Ruling No. 228-14 Iloilo Economic Development Foundation, Inc. c/o Iloilo Business Club, Inc. Rm. 225, 2F Marymart Center III Valeria-Delgado Streets, Iloilo City Attention: Antonio S. Jon Vice President Gentlemen : This refers to your letters dated December 27, 2013 duly indorsed by Revenue Region (RR) No. 11-Iloilo City, requesting for the issuance of a certificate of tax exemption under Sec. 30 (F) of the Tax Code of 1997, as amended. It is represented that Iloilo Economic Development Foundation, Inc. (TIN: 006-462-054-000) 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) under Registration No. CN200725815; and that the purposes for which it was incorporated are the following: 1) To conduct investment promotion and marketing activities for the activities for the City and Province of Iloilo; 2) To spur the development of human resources, in the areas of entrepreneurial and skills development; 3) To provide a formal institutional medium or vehicle for initiating, organizing, sponsoring, and/or financing activities and/or projects that will enhance economic activities and/or geared towards investment promotion in Iloilo; 4) To promote, encourage and facilitate the undertaking of physical development projects, such as industrial estates, land-use and zoning plans, utilities projects, etc.; 5) To support policy research and advocacy activities to enhance the business environment of Iloilo; 6) To conduct other activities for the purpose of developing further the local economy; and 7) To act as central coordinating body and clearing house of all investment promotion and similar activities. A business league is an association of persons having a common business interest. Its activities must be directed to the improvement of business conditions of one or more lines of business as distinguished from the performance of particular services for individual persons. Its purpose must not be to engage in regular business of a kind ordinarily carried on for profit. Moreover, it must be primarily engaged in activities or functions constituting the basis for its exemption and that its primary activity cannot be performing particular services for members or nonmembers. (Section 31, Regulations 40) TACEDI A review of the documents submitted in support of the request shows that the primary activity of Iloilo Economic Development Foundation, Inc. has no qualification as to the commonality of business interest of the members. The qualifications of its members do not depend on a common business interest and the current members do not show to have common business interest. In short, membership is based on their capacity to give funding/financial support to the foundation. (BIR Ruling No. 228-14 dated June 25, 2014) IN VIEW OF THE FOREGOING, this Office is of the opinion that Iloilo Economic Development Foundation, Inc. does not qualify as business league for purposes of exemption under Section 30 (F) of the Tax Code of 1997, as amended. It is therefore liable for regular corporate income taxes imposed under Section 27, Title II of the same Code and other applicable taxes such as Value-Added Tax (VAT) or Percentage Tax. Along with police power and eminent domain, taxation is one of the three basic and necessary attributes of sovereignty. Thus, the State cannot be deprived of this most essential power and attribute of sovereignty by vague implications of law. Rather, being derogatory of sovereignty, the governing principle is that tax exemptions are to be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority; and he who claims an exemption must be able to justify his claim by the clearest grant of statute. Tax exemptions must be construed strictly against the taxpayer and liberally in favor of the taxing authority. The burden of proof rests upon the party claiming exemption to prove that it is in fact covered by the exemption so claimed. In case of doubt, non-exemption must be favored. Taxes being the lifeblood of the government that should be collected without unnecessary hindrance, every precaution must be taken not to unduly suppress it. The request for tax exemption is hereby denied for lack of factual and legal basis. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner Bureau of Internal Revenue