Quirino Farmers Financial Services Association, Inc.

June 30, 2009 BIR RULING [NSNP-(S30C-018) 414-09] Sec. 27 (A) Quirino Farmers Financial Services Association, Inc. San Isidro, Quirino, Isabela Attention: Mr. Jerry B. Reginaldo Manager Gentlemen : This refers to your letter dated October 19, 2007 requesting tax exemption of the Quirino Farmers Financial Services Association, Inc. (QFFSA INC.). HTCSDE It is represented that Quirino Farmers Financial Services Association, Inc. is a non-stock, non-profit organization registered with the Securities and Exchange Commission (SEC) under SEC Registration No. CN200708205 dated May 28, 2007; that the purposes for which it was incorporated are the following: 1. To raise equity through members capital build-up. 2. Provide Savings Facilities to members. 3. Extend loans to eligible members. 4. Mobilize other source of loanable funds at terms most favorable to QFFSA INC. 5. Provide micro-insurance to members. 6. Maintain business partnership with link-bank to mainstream QFFSA INC. 7. Undertake other economic or social activities that are beneficial not only to members but to the entire community as well. that the Association was registered with the BIR on August 31, 2007; that no part of its income inures to the benefit or profit of any private individual or entity, nor distributable as dividend, compensation, or any other form of remuneration or pecuniary benefit to its Trustees, officers, members, donors or contributors; and that in case of dissolution, the remaining assets of the corporation shall be distributed to another foundation or non-stock, non-profit corporation of the same or similar nature and objectives. In reply, please be informed that although QFFSA INC. was organized as a non-stock, non-profit corporation, the purposes for which it was organized do not fall within any of the enumerated subsections under Section 30 of the Tax Code of 1997, as amended, which provides for the corporations, associations and organizations exempt from income tax. It is significant to note that the registered activity of QFFSA INC. in its BIR Certificate of Registration is "Lending Activities" and that the primary source of its income is the "Interest on Loans" as shown by its December 31, 2007 Income Statement. These are indications of the true nature of the corporation as a credit facility or financing enterprise administered for profit. EaIDAT Such being the case, your request for tax exemption of QFFSA INC. is denied for lack of legal basis as the organization is not one of those contemplated under Section 30 of the Tax Code of 1997 and consequently it is subject to income tax under Section 27 (A) of the same Tax Code. Laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority (Tax Principles and Remedies, 2nd ed. 2005; p. 111, by Justice Japar B. Dimaampao). Taxation is the rule and exemption is the exception. The law does not look with favor on tax exemptions and that he who would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted (Sea-land Service, Inc. vs. Court of Appeals, 357 SCRA 444; BPI-Family Savings Bank vs. Court of Appeals, et al., 330 SCRA 507). 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, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service