BIR Ruling No. 467-11

December 2, 2011 BIR RULING NO. 467-11 Tax Code, Sections 27 (D) (1), 30 (C); 105; and RR No. 02-40; BIR Ruling No. 173-11; BIR Ruling No. 046-11; BIR Ruling No. 044-11; and BIR Ruling No. 041-11 Panay Amateur Radio Club-Iloilo, Inc. St. Joseph School Benigno Aquino Ave., San Rafael, Mandurriao, Iloilo City Attention: Mr. Robert L. Garcia, Jr. President-PARC-Iloilo Gentlemen : This refers to your letter dated October 13, 2010 requesting for a tax exemption pursuant to Section 30 (C) of the Tax Code of 1997, as amended. It is represented that Panay Amateur Radio Club-Iloilo, Incorporated with Taxpayer's Identification No. 298-432-861-000, 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. CN201029097 and with SEC Certificate of Incorporation dated June 16, 2011; and that the purposes for which it was incorporated are the following: 1. To lend solidarity and purposes to the cause of amateur (Ham) radio in the Philippines particularly in the Panay and Guimaras Island area; to encourage or assist all persons interested in any or all aspects of amateur (Ham) radio and allied techniques with special reference to licensed amateur radio stations and to promote the extension and active participation and coordination in such pursuits. 2. To promote and encourage among its members' scientific and/or technological research and/or development in the field of radio and electronic sciences and such ramifications as may affect the generation, transmission and/or reception of radio signals by means of theoretical analysis, exploration and/or experimentation. 3. To render free of charge immediate service to the community and to the public in general, especially during times of emergency; IEcaHS 4. To build, construct, assemble, install, establish, operate or maintain radio, electronic and communications equipment and stations at its principal office necessary for the furtherance of the aims and purposes of the corporation for experimental production and testing or radio and communication equipments, materials, and processes; and 5. To establish, promote, or assist in establishing or promoting, and to subscribe to, or become a member of any other organization whose objects are similar or in part similar to the objectives of the corporation or the establishment or promotion of which may be beneficial to the corporation, provided that no subscription or fee be paid to any other such company, association, or club, except those in furtherance of the objectives of the corporation. In reply, please be informed that this Office cannot as yet issue the requested ruling/certificate of tax exemption because Panay Amateur Radio Club-Iloilo, Incorporated has to prove by actual operation for at least three (3) years that it is really an organization/association exempt from income tax under Section 30 (C) of the Tax Code of 1997, as amended. Panay Amateur Radio Club-Iloilo, Incorporated can file the necessary annual information return instead of an income tax return on or before the 15th day of the fourth month of the preceding accounting period following the start of its operation as an exempt organization as required under Section 24 of Revenue Regulations No. 2-40 dated February 10, 1940 (Collector vs. Sinco, G.R. L-9276 dated October 23, 1956) . Based on such information return, we shall conduct the necessary investigation on the activities undertaken during the period. The letter of exemption shall thereafter be issued depending upon the result of our investigation. However, Panay Amateur Radio Club-Iloilo, Incorporated is subject to the corresponding internal revenue taxes imposed under the National Internal Revenue Code on its income derived from any of its properties, real or personal, or any activity conducted for profit regardless of the disposition thereof, which income should be returned for taxation. Likewise, interest income from currency bank deposits and yield or any other monetary benefits from deposit substitute instruments and from trust funds and similar arrangements, and royalties derived from sources within the Philippines are subject to the 20% final withholding tax: provided, however, that interest income derived by it from a depository bank under the expanded foreign currency deposit system shall be subject to 7-1/2% final withholding tax pursuant to Section 27 (D) (1), in relation to Section 57 (A), both of the Tax Code of 1997. Moreover, it is required to file on or before the 15th day of the fourth month following the end of the accounting period a Profit and Loss Statement and Balance Sheet with the Annual Information Return under oath, stating its gross income and expenses incurred during the preceding period and a certificate showing that there has not been any change in its By-laws, Articles of Incorporation, manner of operation and activities as well as sources and disposition of income. CIETDc It should be understood that Panay Amateur Radio Club-Iloilo, Incorporated shall be constituted as withholding agent of the government if it acts as an employer and its employee receives compensation income subject to the withholding tax under Section 79 (A), Chapter XIII, Title II of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98, as amended, or if it makes income payments to individuals or corporations subject to the expanded withholding tax provided for in Section 57 (B) of the Tax Code of 1997, also as implemented by Revenue Regulations No. 2-98, as amended. (BIR Ruling No. 173-11) . Under Section 235 of the Tax Code of 1997, any provision of existing general and special law to the contrary notwithstanding, the books of accounts and other pertinent records of tax-exempt organizations or grantees of tax incentives shall be subject to examination by the BIR for purposes of ascertaining compliance with the conditions under which it has been granted tax exemptions or tax incentives, and its tax liabilities, if any. Finally, it is subject to the payment of the annual registration fee of PhP500.00 as prescribed in Section 236 (B) of the Tax Code of 1997, as amended. It is also required under Section 6 (C) in relation to Section 237 of the same Code to issue duly registered receipts or sales or commercial invoices for each sale or transfer of merchandise or for services rendered which are not directly related to the activities for which the Association is registered [Revenue Memorandum Circular (RMC) No. 76-2003]. For purposes of securing a permanent exemption after the three (3)-year period, Panay Amateur Radio Club-Iloilo, Incorporated is required to submit the following documents pursuant to Revenue Memorandum Circular No. 14-2001: 1) Certified true copy of the Certificate of Registration with the SEC; 2) Certified true copy of the Articles of Incorporation which includes the following provisions: a. That the corporation is non-stock, non-profit; b. That the primary purpose for which it was created is one of those enumerated under Sec. 30 of the Tax Code of 1997, as amended; c. That no part of the net income shall inure to the benefit of any of its members; d. That the trustees do not receive any compensation; and e. In case of dissolution, assets of the corporation shall be transferred to similar institution or to the government. 3) Certified true copy of the By-Laws; 4) Certification under oath that there has not been any change in the Articles of Incorporation and/or By-laws 5) Certified true copy of the Annual Information Returns and Financial Statements for the last three (3) years of operation; 6) BIR Certificate of Registration; aATHES This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue