BIR Ruling No. 521-11

December 22, 2011 BIR RULING NO. 521-11 Tax Code, Sections 27 (D) (1), 30 (G); 105; RR No. 02-40; BIR Ruling No. 179-11; BIR Ruling No. 154-11; BIR Ruling No. 148-11; BIR Ruling No. 147-11 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 October 6, 2010 requesting on behalf of Personnel Officers Association of the Philippines (POAP),Inc. for the issuance of a 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 POAP, with Taxpayer's Identification No. 000-802-794-000, 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),bearing SEC Registration No. CN201014103; and that the purposes, among others, for which it was incorporated, are the following: a. To establish and continually develop the corporation as the center of excellence in human resource management and development at all levels in the government service (from the trade and craft workers through the various levels of the sub-professional, professional and career executive services); b. To provide institutional leadership including adopting measures to enhance professional growth and careerism through the conduct of trainings, conferences, symposia, consultancy, technical/professional researches and studies, and other interventions; c. To institutionalize interest and firm commitment to the advocacy for strategically responsive, professional and ethical human resource management principles, policies and practices including developing, maintaining and sustaining public responsibility and accountability in government service; IAEcCa d. To help provide workers in all areas of the public service access to appropriate and effective channels of communication and contact on human resource advancement and development opportunities and to facilitate foster their interests and constant participation therein; and e. To help address the concerns of government offices and officials in all levels of the government's hierarchical organization to stimulate and coordinate government-wide, and/or in partnership with the private sector, the delivery of effective, timely and responsive government services, including developing goodwill, understanding and true spirit of camaraderie amongst them and those of similar groups in the Philippines and abroad. In reply, please be informed that 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. POAP 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. ( BIR Ruling No. 179-11 dated June 7, 2011) However, POAP 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. ( BIR Ruling No. 154-11 dated May 17, 2011) HASDcC It should be understood that POAP 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. 148-11 dated June 12, 2011). 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. ( BIR Ruling No. 147-11 dated May 12, 2011) 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, POAP 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. aEAcHI 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; and 6) BIR Certificate of Registration. 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