BIR Ruling No. 448-12

July 10, 2012 BIR RULING NO. 448-12 R.A. 9178; RMC No. 40-04; BIR Ruling No. 207-2011; BIR Ruling No. 248-2011; BIR Ruling No. 249-2011 Amanpulo Foods, Inc. Auto Camp #100 Ortigas Ave., Ugong, Pasig City Attention: Mr. Donato Mejia, Jr. President Gentlemen : This refers to your letter dated August 2, 2010 requesting exemption from the payment income tax by Ang Pulo Ihaw-Ihaw pursuant to the provisions of Republic Act (R.A.) No. 9178 otherwise known as "An Act to Promote the Establishment of Barangay Micro Business Enterprises (BMBEs), Providing Incentives and Benefits Therefor, and for other Purposes" . Documents submitted disclose that AMANPULO FOODS, INC., with Taxpayer Identification No. 007-335-312-000, is a domestic corporation registered with the Securities and Exchange Corporation (SEC) under SEC Registration No. CS200911180 dated July 22, 2009; that AMANPULO FOODS, INC., is doing business under the name and style "Ang Pulo Ihaw-Ihaw" engaged in maintaining a restaurant and coffeeshop; that AMANPULO FOODS, INC., is registered as a Barangay Micro-Business Enterprise (BMBE) and was awarded Certificate of Authority No. under BMBE Registration No. 181 dated June 24, 2010 pursuant to R.A. No. 9178, entitling "Ang Pulo Ihaw-Ihaw" to all benefits and incentives subject to the terms and conditions set forth in the said law; that its incentives under the law is effective for two (2) years and will expire on June 24, 2012; and that in support of this request, AMANPULO FOODS, INC. has completely submitted the following documentary requirements on September 15, 2010: 1. Original BMBE's Certificate of Authority signed by the City Mayor of Pasig; 2. Sworn Statement of the values of assets owned and/or used/to be used by the BMBE and/or its affiliates reflecting the current values thereof. The Sworn Statement shall be supported by pertinent information and documents such as: HaIESC a. Acquisition cost, date of acquisition and depreciated value for existing assets; b. Invoices and/or official receipts for newly-acquired assets not yet depreciated; c. Duly-notarized copy of Contract of Lease for assets used in the conduct of business covered by lease agreement; and d. Copy of Loan Contract/s, if any, and Duly-Notarized Certification of Amortization Payments on the Loan. 3. Copy of the latest Audited Financial Statement, and Annual Income Tax Return; 4. BIR Certificate of Registration; 5. Affidavit of Non-forum Shopping. In reply, please be informed that Sections 3 (a) and 7 of R.A. 9178 provide, viz. : "SEC. 3. Definition of Terms . As used in the Act, the following terms shall mean: (a) "Barangay Micro Business Enterprise," hereinafter referred to as BMBE, refers to any business entity or enterprise engaged in the production, processing or manufacturing of products or commodities, including agro-processing: trading and services, whose total assets including those arising from loans but exclusive of the land on which the particular business entity's office, plant and equipment are situated, shall not be more than Three Million Pesos (P3,000,000.00). The definition shall be subject to review and upward adjustment by the SMED Council, as mandated under Republic Act No. 6977, as amended by Republic Act No. 8289. xxx xxx xxx SEC. 7. Exemption from Taxes and Fees . All BMBEs shall be exempt from income tax for income arising from the operations of the enterprise. HAcaCS The LGUs are encouraged either to reduce the amount of local taxes, fees and charges imposed or to exempt the BMBEs from local taxes, fees and charges." Department Order (D.O.) No. 17-04, as circularized by Revenue Memorandum Circular (RMC) No. 40-04 dated May 26, 2004, provided for the "Guidelines to Implement the Registration of Barangay Micro Business Enterprises and the Availment of Tax Incentives under R.A. 9178, otherwise known as the "Barangay Micro Business Enterprises (BMBEs) Act of 2002". Pertinent provision of D.O. No. 17-04 states: "RULE 3 "GUIDELINES IN THE AVAILMENT OF INCOME TAX EXEMPTION Sec. 1. Exemption from Income Tax . A duly registered BMBE shall be exempt from income tax on income arising purely from its operations as such BMBE: Provided, That this income tax exemption shall not apply to the following: (a) Interest, including those from any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements; (b) Royalties; (c) Prizes and other winnings; (d) Cash and/or property dividends; (e) Capital gains from the sale of shares of stock not traded through the stock exchange; (f) Capital gains from the sale or other disposition of real property; (g) The share of an individual in the net income after tax of an association, a joint account, or a joint venture or consortium; CScTED (h) The share of an individual in the distributable net income after tax of a taxable partnership of which he is a partner; (i) Income from the practice of profession received directly from the clients or from the professional partnership of which the individual is a partner; (j) Compensation; and (k) All other forms of passive income and income from revenues not effectively connected with or arising from operations of the BMBEs as such." Inasmuch as AMANPULO FOODS, INC.'s "Ang Pulo Ihaw-Ihaw" is a registered BMBE and was awarded BMBE Certificate of Authority by the City of Pasig, it is therefore exempt from the payment of income tax for income arising from the operations of the enterprise for a period of two (2) years from June 24, 2010 until June 24, 2012. (BIR Ruling No. 207-2011 dated July 1, 2011; BIR Ruling No. 248-2011 dated July 26, 2011; and BIR Ruling No. 249-2011 dated July 26, 2011) However, the income tax exemption of AMANPULO FOODS, INC.'s "Ang Pulo Ihaw-Ihaw" shall not apply to its income from the following: (a) Interest, including those from any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements; (b) Royalties; (c) Prizes and other winnings; (d) Cash and/or property dividends; (e) Capital gains from the sale of shares of stock not traded through the stock exchange; (f) Capital gains from the sale or other disposition of real property; (g) The share of an individual in the net income after tax of an association, a joint account, or a joint venture or consortium; STEacI (h) The share of an individual in the distributable net income after tax of a taxable partnership of which he is a partner; (i) Income from the practice of profession received directly from the clients or from the professional partnership of which the individual is a partner; (j) Compensation; and (k) All other forms of passive income and income from revenues not effectively connected with or arising from operations of the BMBE as such. For purposes of exemption from the creditable withholding tax on income payments, "Ang Pulo Ihaw-Ihaw" shall furnish its customers with a certified true copy of its amended BIR registration certificate. (Sec. 3, Rule 3, D.O. No. 17-04) Furthermore, "Ang Pulo Ihaw-Ihaw" is required to register as a BMBE with the Revenue District Office having jurisdiction over it. (Sec. 3, Rule 3, D.O. No. 17-04) As such, "Ang Pulo Ihaw-Ihaw" is subject to the payment of an annual registration fee of Five hundred Pesos (P500.00) as prescribed in Section 236 (B) of the Tax Code of 1997, as amended, upon its registration as such, and every year thereafter on or before the last day of January. Finally, it is required to file on or before the 15th day of the fourth month following the end of the accounting period an Annual Information Return, together with an Account Information Form, or its equivalent, containing data lifted from audited financial statements and a sworn statement of assets owned and/or used in business. (Sec. 4, Rule 3, D.O. No. 17-04) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. AECacT Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue