BIR Ruling No. 625-12

November 22, 2012 BIR RULING NO. 625-12 Section 30 (G) of the Tax Code of 1997, as amended; BIR Ruling No. 179-11; BIR Ruling No. 154-11; BIR Ruling No. 148-11; BIR Ruling No. 147-11 Felix Y. Manalo Foundation, Inc. No. 1 Central Avenue, New Era Quezon City Attention: Atty. Restituto S. Lazaro Member, Board of Trustees Gentlemen : This refers to your letter dated September 8, 2011 requesting on behalf of Felix Y. Manalo Foundation, Inc . for the issuance of a certificate of tax exemption organization not organized for profit but operated exclusively for the promotion of social welfare pursuant to Section 30 (G) of the Tax Code of 1997, as amended. STcADa It is represented that Felix Y. Manalo Foundation, Inc . with Taxpayer's Identification No. 007-973-126-000 , 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) under Registration No. CN201101643 and with SEC Certificate of Incorporation dated 4 February 2011 ; and that the purposes for which it was incorporated are the following: 1) To organize and coordinate projects that provide health care, financial and livelihood assistance, and disaster relief in poor urban and rural areas, and those affected by calamities; 2) To work for the improvement and advancement of medical, dental, surgical, and other related services for the communities it serves; 3) To organize community development and livelihood projects, including seminars and trainings, construct and provide housing facilities to the needy, and provide scholarships to poor but deserving individuals in academic, vocational, technical, livelihood and entrepreneurial courses; 4) To produce, publish, support and/or distribute radio and television shows films and programs, and other multi-media materials for charitable, social and/or educational purposes; in all formats and through any media now known or hereafter developed; 5) To preserve and enhance culture, arts and sports in different countries by, but not limited to, establishing and maintaining museums and learning centers, supporting ethic artisans and craftsmen, and undertaking related activities that will encourage individuals, especially the youth, to appreciate their heritage; 6) To organize, maintain and sponsor medical, legal, educational and scientific research project and services which may be established in furtherance of the purposes and objectives of this Foundation; 7) To engage and accept volunteers needed to accomplish the purposes of the Foundation; 8) To conduct research and projects for environmental awareness and for conservation of natural resources; 9) To engage the cooperation of, or establish relations with other individuals, entities or organizations in the accomplishment of the Foundation's purposes and objectives; 10) To receive and/or give grants, donations, endowments and financial aids or loans from any sources whatsoever, not only in the Philippines but also in other countries, and to make use of them in activities to carry out the objectives of the foundation. Grants, donations, endowments and financial aids or loans received by the Foundation shall not redound to the benefit of any member, officer or trustee of the Foundation; 11) To invest, reinvest and/or exchange any portion of its funds, revenues, earnings or capital in acquiring shares of stock or bonds of other corporations, and other forms of investments, as the Foundation may decide from time to time; that the income, revenues or earnings shall exclusively be applied to the maintenance of the Foundation, the expansion and acquisition of facilities and equipment, the funding of its projects and activities to carry out the specific purposes as herein stated; 12) To acquire, purchase, sell, lease, mortgage, encumber and/or convey in any manner real properties for the benefit of the Foundation and accomplishment of its objectives and purposes; 13) To engage in any enterprise proper to its nature or do such things connected with the growth and development of the Foundation or which may be directly or indirectly, incidental or conducive to the attainment of its purposes and objectives; 14) Generally to do all such things, exercise authority as may directly or indirectly be necessary, incidental or conducive to carry out the purposes and objectives of the Foundation. In reply, please be informed that this Office cannot as yet issue the requested ruling/certificate of tax exemption because Felix Y. Manalo Foundation, Inc . has to prove by actual operation for at least three (3) years that it is really an organization exempt from income tax under Section 30 (G) of the Tax Code of 1997, as amended. HTDcCE Felix Y. Manalo Foundation, Inc . 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. 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, Felix Y. Manalo Foundation, Inc . 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. ( BIR Ruling No. 154-11 dated May 17, 2011 ) 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. 148-11 dated May 12, 2011 ) It should be understood that the said exempt organization 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. 147-11 dated May 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]. Finally, for purposes of securing a permanent exemption after the three (3)-year period, Felix Y. Manalo Foundation, Inc . 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; EcICDT 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; 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 ascertained 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