BIR Ruling No. 504-12

July 31, 2012 BIR RULING NO. 504-12 000-00 Personnel Officers Association of the Philippines (POAP), Inc. Rm. 310 Delta Bldg., West Triangle Quezon City Attention: Virginia Naagas-Bactad President Gentlemen : This refers to your letter dated March 14, 2012 requesting for the issuance of permanent certificate of tax exemption enjoyed by non-stock corporation or association organized and operated exclusively for purposes under Section 30 (G) of the Tax Code of 1997, as amended. It is represented that Personnel Officers Association of the Philippines (POAP), Inc. with Taxpayer's Identification No. 000-802-794-000, is a domestic corporation duly registered with the Securities and Exchange Commission on March 25, 1960; that the corporate life is for a period of fifty (50) years from the date of the incorporation; that the Personnel Officers Association of the Philippines (POAP), Inc. failed to file with the Securities and Exchange Commission (SEC) a request for an extension of its corporate life prior to its expiration last March 25, 2010; and that on September 3, 2010, SEC issued Certificate of Registration under Registration No. CN201014103 together with the new Tax Identification Number 007-863-554-000. It is further represented that this Office issued through BIR Ruling 521-2011 dated December 22, 2011 to Personnel Officers Association of the Philippines (POAP), Inc. a temporary certificate of tax exemption enjoyed by non-stock corporation or association organized and operated exclusively for purposes under Section 30 (G) of the Tax Code of 1997, as amended. In reply, please be informed that in Alhambra Cigar & Cigarette Manufacturing Company, Inc. vs. Securities & Exchange Commissions , 1 it was held that failure to extend a corporate existence results in its dissolution: As we look in retrospect of the facts, we find these: From July 15 to October 28, 1963, when Alhambra made its attempt to extend its corporate existence, its original term of fifty years had already expired (January 15, 1962); it was in the midst of the three-year grace period statutorily fixed in Section 77 of the Corporation Law, thus: SEC. 77. Every corporation whose charter expires by its own limitation or is annulled by forfeiture or otherwise, or whose corporate existence for other purposes is terminated in any other manner, shall nevertheless be continued as a body corporate for three years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and of enabling it gradually to settle and close its affairs, to dispose of and convey its property and to divide its capital stock, but not for the purpose of continuing the business for which it was established. Plain from the language of the provision is its meaning: continuance of a "dissolved" corporation as a body corporate for three years has for its purpose the final closure of its affairs, and no other; the corporation is specifically enjoined from "continuing the business for which it was established". The liquidation of the corporation's affairs set forth in Section 77 became necessary precisely because its life had ended. For this reason alone, the corporate existence and juridical personality of that corporation to do business may no longer be extended . Worth bearing in mind, at this juncture, is the basic development of corporation law. The common law rule, at the beginning, was rigid and inflexible in that upon its dissolution, a corporation became legally dead for all purposes . Statutory authorizations had to be provided for its continuance after dissolution "for limited and specified purposes incident to complete liquidation of its affairs''. Thus, the moment a corporation's right to exist as an "artificial person" ceases, its corporate powers are terminated "just as the powers of a natural person to take part in mundane affairs cease to exist upon his death". There is nothing left but to conduct, as it were, the settlement of the estate of a deceased juridical person . xxx xxx xxx On this point, we again draw from Fletcher: "There is a broad distinction between the extension of a charter and the grant of a new one. To renew a charter is to revive a charter which has expired, or, in other words, "to give a new existence to one which has been forfeited, or which has lost its vitality by lapse of time". To "extend" a charter is "to increase the time for the existence of one which would otherwise reach its limit at an earlier period". Nowhere in our statute Section 18, Corporation Law, as amended by Republic Act 3531 do we find the word "renew" in reference to the authority given to corporations to protract their lives. Our law limits itself to extension of corporate existence. And, as so understood, extension may be made only before the term provided in the corporate charter expires. Based on the foregoing jurisprudence, the SEC's issuance of new Certificate of Registration (with its corresponding TIN) confirms that the old corporation was dissolved and a new corporation was created. Nowhere in our statute do we find the word renew in reference to the authority given to corporations to protract their lives, thus, failure of Personnel Officers Association of the Philippines (POAP), Inc. to extend its corporate existence resulted in its dissolution. Accordingly, this Office cannot as yet issue the requested certificate of tax exemption because POAP 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 (G) of the Tax Code of 1997, as amended. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. G.R. No. L-23606 dated July 29, 1968.