BIR Ruling No. 494-14

December 11, 2014 BIR RULING NO. 494-14 Blacksmith Institute, Inc. 3rd Floor Vega Center, Lopez Avenue Los Baos, Laguna Attention: Jennifer Marie Sunga-Amparo Resident Agent Gentlemen : This refers to your letter dated January 7, 2013 requesting for confirmation of the tax exemption of the Philippine representative office of Blacksmith Institute, Inc. as a nonstock, nonprofit corporation under Section 30 of the National Internal Revenue Code of 1997, as amended (NIRC). It is represented that Blacksmith Institute, Inc., a foreign company organized and existing under the laws of New York, State of New York, United States of America, was duly licensed by the Securities and Exchange Commission to establish a representative office in the Philippines to improve the environmental conditions in the Philippines by working with governmental and non-governmental agencies in structuring programs that will create habitable and sustainable environments; to provide liaison, technical and financial support for these programs; to provide on-going implementation assistance for the continuous viability of these programs in the Philippines. In reply, please be informed that Revenue Memorandum Order No. 20-2013 prohibits a branch office of a foreign nonstock nonprofit corporation from qualifying as an exempt organization under Section 30 of the NIRC. 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. (BIR Ruling No. 310-2011 dated August 22, 2011) TAaIDH IN VIEW OF THE FOREGOING, this Office is of the opinion that the Philippine representative office of Blacksmith Institute, Inc. does not qualify for exemption under Section 30 of the NIRC. It is therefore liable for income taxes imposed under Title II of the NIRC. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue