BIR Ruling No. 607-12

November 5, 2012 BIR RULING NO. 607-12 Sec. 30 of the Tax Code, as amended The Cancer Resource and Wellness (Carewell) Community Foundation, Inc. 6/F S&L Building, dela Rosa cor. Esteban Sts. Legaspi Village, Makati City Attention: Oliver T. Calasanz Managing Director Gentlemen : This refers to your letter dated March 22, 2012 requesting for a ruling as to the exemption of THE CANCER RESOURCE AND WELLNESS (CAREWELL) COMMUNITY FOUNDATION, INC. from payment of tax on interest income. aIcDCA It is represented that THE CANCER RESOURCE AND WELLNESS (CAREWELL) COMMUNITY FOUNDATION, INC. is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission (SEC) under Registration No. CN200502436 and with Taxpayer's Identification Number (TIN) 242-358-218-000; and that prior to its accreditation with the Philippine Council for NGO Certification (PCNC) and its registration as a donee institution on September 1, 2011 with Certificate of Registration No. 068-2011, it was granted exemption under BIR Ruling No. NSNP(S30G-001)010-2009 dated January 12, 2009. Based on the foregoing, you now request for a ruling that THE CANCER RESOURCE AND WELLNESS (CAREWELL) COMMUNITY FOUNDATION, INC. is exempted from payment of tax on interest income from currency bank deposits, time deposits, trust funds and similar instruments. In reply, we regret to inform you that your request for tax exemption cannot be granted for lack of legal basis. Corporations organized for charitable and social welfare purposes are subject to the corresponding internal revenue taxes imposed under the Tax Code of 1997 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, hence, its interest income from Philippine currency bank deposits and yield or other monetary benefits from deposit substitute instruments are subject to the 20% final withholding tax pursuant to Section 27 (D) (1), in relation to Section 57 (A), both of the Tax Code of 1997. The last paragraph of Section 30 of the Tax Code, as amended, clearly provides that: " SEC. 30. Exemptions from Tax on Corporations. The following organizations shall not be taxed under this Title in respect to income received by them as such: xxx xxx xxx (E) Nonstock corporation or association organized and operated exclusively for religious, charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans, no part of its net income or assets shall belong to or inure to the benefit of any member, organizer, officer or any specific person; xxx xxx xxx Notwithstanding, the provisions in the preceding paragraphs, the income of whatever kind and character of the foregoing organizations from any properties, real or personal, or from any of the activities conducted for profit regardless of the disposition made of such income, shall be subject to tax imposed under this Code ." (Underscoring supplied.) Hence, THE CANCER RESOURCE AND WELLNESS (CAREWELL) COMMUNITY FOUNDATION, INC. shall only be exempted from income tax on the income earned from its operation as a non-stock and non-profit organization pursuant to the purposes for which it was incorporated as indicated in its Articles of Incorporation. BIR Ruling No. NSNP(S30G-001)010-2009 dated January 12, 2009, is explicit that THE CANCER RESOURCE AND WELLNESS (CAREWELL) COMMUNITY FOUNDATION, INC. is liable for the payment of tax on interest income from currency bank deposits, time deposits, trust funds and similar instruments. caITAC "Likewise, the 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." It is a well-settled principle in statutory construction that exemption from tax is strictly construed against the taxpayer and liberally in favor of the taxing authority. A taxpayer who claims an exemption must be able to justify by the clearest grant of organic or statute law its exemption from the payment of tax. An exemption from the common burden cannot be permitted to exist upon vague implication. In view of the foregoing premises, this Office rules that THE CANCER RESOURCE AND WELLNESS (CAREWELL) COMMUNITY FOUNDATION, INC. shall be liable for the payment of the 20% final withholding tax on bank deposits and yield or other monetary benefits from deposit substitute instruments. Please be guided accordingly. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue