BIR Ruling No. 582-12

September 26, 2012 BIR RULING NO. 582-12 Section 30 (E) of the Tax Code of 1997; BIR Ruling No. 174-2011; BIR Ruling No. 172-2011; BIR Ruling No. 165-2011; BIR Ruling No. 115-2011 The Bishop of International Bible Baptist Church of Koronadal City, South Cotabato (IBBC) Incorporated 643 Osmea Street, Koronadal City South Cotabato Attention: Rev. Serafin P. Abellar Assistant Regional Servant Gentlemen : This refers to your letter dated April 30, 2012 endorsed by Revenue Region No. 18, Koronadal City through 2nd Indorsement dated May 11, 2012 requesting for the issuance of a certificate of tax exemption enjoyed by a non-stock corporation or association organized and operated exclusively for religious purposes under Section 30 (E) of the Tax Code of 1997 as amended. cACTaI It is represented that THE BISHOP OF INTERNATIONAL BIBLE BAPTIST CHURCH OF KORONADAL CITY, SOUTH COTABATO (IBBC) INCORPORATED with Taxpayer's Identification Number (TIN) 420-824-204, duly organized under the laws of the Philippines, registered with the Securities and Exchange Commission (SEC) under Registration No. CN201129147 dated July 9, 2012; that Rev. Serafin P. Abellar is the Bishop or President and desires to become a corporation sole under the laws of the Philippines under the name of THE BISHOP OF INTERNATIONAL BIBLE BAPTIST CHURCH OF KORONADAL CITY, SOUTH COTABATO (IBBC) INCORPORATED; and that Rev. Serafin P. Abellar is charged with the administration of the temporalities and the management of the affairs, estate and properties of THE BISHOP OF INTERNATIONAL BIBLE BAPTIST CHURCH OF KORONADAL CITY, SOUTH COTABATO (IBBC) INCORPORATED. In support of its request, THE BISHOP OF INTERNATIONAL BIBLE BAPTIST CHURCH OF KORONADAL CITY, SOUTH COTABATO (IBBC) INCORPORATED submitted the following required documents: 1) Letter application for tax exemption; 2) Certified true copy of the SEC Certificate of Registration; 3) Certified true copy of the Amended Articles of Incorporation which includes the following provisions: a) That the corporation is a corporation sole; b) That the primary purpose for which it was created is one of those enumerated under Sec. 30 (E) 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 organization shall be transferred to similar institution or to the government." 4) Certified true copy of the By-Laws; 5) Certified true copy of the General/Business/Company Relationship Information; and 6) Copy of the BIR Certificate of Registration. In reply, please be informed that this Office cannot as yet issue the requested ruling/certificate of tax exemption because THE BISHOP OF INTERNATIONAL BIBLE BAPTIST CHURCH OF KORONADAL CITY, SOUTH COTABATO (IBBC) INCORPORATED has to prove by actual operation for at least three (3) years that it is really a corporation/association exempt from income tax under Section 30 (E) of the Tax Code of 1997, as amended. (BIR Ruling No. 174-2011 dated May 27, 2011) EacHCD THE BISHOP OF INTERNATIONAL BIBLE BAPTIST CHURCH OF KORONADAL CITY, SOUTH COTABATO (IBBC) INCORPORATED can file the necessary annual information return instead of an income tax return on or before the 15th day of the fourth month following the end of its taxable year as required under Section 24 of Revenue Regulations No. 2-40 dated February 10, 1940 (Collector vs. Sinco, G.R. No. 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, THE BISHOP OF INTERNATIONAL BIBLE BAPTIST CHURCH OF KORONADAL CITY, SOUTH COTABATO (IBBC) 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. (BIR Ruling No. 172-2011 dated May 25, 2011) It should be understood that THE BISHOP OF INTERNATIONAL BIBLE BAPTIST CHURCH OF KORONADAL CITY, SOUTH COTABATO (IBBC) 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. 165-2011 dated March 23, 2011 and BIR Ruling No. 115-2011 dated April 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. 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]. cSICHD Finally, for purposes of securing a permanent exemption after the three (3)-year period, THE BISHOP OF INTERNATIONAL BIBLE BAPTIST CHURCH OF KORONADAL CITY, SOUTH COTABATO (IBBC) 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) Certified true copy of the Annual Information Returns and Financial Statements for the last three (3) years of operation; 5) Certification under oath that there has not been any change in the By-Laws, Articles of Incorporation, manner of activities as well as the sources and disposition of income; 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. aCcEHS Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue