Rhema Christian Center Philippines, Inc.

January 17, 2020 BIR RULING NO. S30E-014-2020 Section 30 (E) of the NIRC of 1997, as amended; RMO No. 20-2013; RMC No. 051-14; BIR Ruling No. 466-2014 Rhema Christian Center Philippines, Inc. San Juan De Mata, Tarlac City 2300 Attention: Rev. Karen Elaine Cedergren President Gentlemen : This refers to your letter dated July 10, 2014, applying on behalf of Rhema Christian Center Philippines, Inc. for tax exemption certificate being enjoyed by non-stock, non-profit corporation or association under Section 30 (E) of the National Internal Revenue Code (NIRC) of 1997, as amended, which was forwarded to this Office by Revenue District Office No. 17A, Tarlac City on July 21, 2016. ASEcHI It is represented that Rhema Christian Center Philippines, Inc. with BIR Taxpayer's Identification No. (TIN) _______________ and Certificate of Registration No. _______________ dated January 16, 2001, is a non-stock, non-profit association duly organized and existing under the laws of the Republic of the Philippines; that it is registered with the Securities and Exchange Commission (SEC) under Company Registration No. ______; and that the purpose for which said corporation is formed is to promote the gospel of Jesus Christ in a manner as to care for and develop the whole man through the establishment, operation and maintenance of centers in various parts of the Philippines where there are complete Christian training. In reply, please be informed that Section 30 of the National Internal Revenue Code of 1997, as amended, enumerates the non-stock and/or non-profit corporations/associations/organizations that are exempt from income tax in respect to income received by them as such. Section 30 (E) of the National Internal Revenue Code of 1997, as amended, provides, viz. : "Sec. 30. Exempt 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 asset shall belong to or inure to the benefit of any member, organizer, officer or any specific person; cTDaEH xxx xxx xxx." "Non-stock" means "no part of its income is distributable as dividends to its members, trustees, or officers" and that any profit " obtained as an incident to its operations shall, whenever necessary or proper, be used for the furtherance of the purpose or purposes for which the corporation was organized ." 1 "Non-profit" means that " no net income or asset accrues to or benefits any member or specific person, with all the net income or asset devoted to the institution's purposes and all its activities conducted not for profit ." 2 Revenue Memorandum Circular (RMC) No. 51-2014 has clarified that in order for an entity to qualify as a non-stock and/or non-profit corporation/association/organization exempt from income tax under Section 30 of the National Internal Revenue Code, as amended, its earnings or assets shall not inure to the benefit of any of its trustees, organizers, officers, members or any specific person. The following are considered "inurements" of such nature: " 1. The payment of compensation, salaries, or honorarium to its trustees or organizers; xxx xxx xxx." In the submitted documents of Rhema Christian Center Philippines, Inc., it was disclosed that the Board of Trustees are entitled to representations and living allowances. Page 2 "THIRD:" of the Articles of Incorporation states that: "x x x the corporation is not for gain or individual profit, no dividend shall ever be declared or compensation paid to any of its officers or members, except reasonable living allowance, and necessary representations and traveling allowances, funds permitting, and such funds have been properly appropriated by the Board of Directors. (underscoring ours)" The giving of living and representation allowances to the members of the Board of Trustees is considered as distribution of the equity (including the net income) of Rhema Christian Center Philippines, Inc. This is a form of private inurement which the law prohibits in the organization and operation of a non-stock, non-profit corporation. This act violates the requirement that no part of the net income or assets of the corporation shall inure to the benefit of any individual or specific person. Thus, Rhema Christian Center Philippines, Inc. cannot be qualified as a non-stock, non-profit corporation under Section 30 (E) of the National Internal Revenue Code of 1997, as amended. Please bear in mind that, " being a non-stock and/or non-profit corporation does not, by this reason alone, completely exempt an institution from tax ." 3 Thus, " statutes granting tax exemptions are construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority. A claim of tax exemption must be clearly shown and based on language in law too plain to be mistaken. Otherwise stated, taxation is the rule, exemption is the exception. The burden of proof rests upon the party claiming the exemption to prove that it is in fact covered by the exemption so claimed ." 4 (BIR Ruling No. 466-2014 dated November 19, 2014) ITAaHc In view of the foregoing, the request of Rhema Christian Center Philippines, Inc. to be exempted from income tax on its income as a Section 30 (E) corporation is hereby denied as it failed to prove that it is a non-profit corporation. Therefore, Rhema Christian Center Philippines, Inc. shall be treated as an ordinary corporation subject to thirty percent (30%) income tax rate pursuant to Section 27 (A) and other internal revenue taxes imposed by the National Internal Revenue Code of 1997, as amended. Please be guided accordingly. Very truly yours, (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue Footnotes 1. Section 87, Corporation Code. 2. CIR vs. St. Luke's Medical Center, Inc. , G.R. Nos. 195909 and 195960 dated 26 September 2012. 3. Ibid. 4. Quezon City and The City Treasurer of Quezon City vs. ABS-CBN Broadcasting Corporation [G.R. No. 166408, 6 October 2008].