Philippine Orthopaedic Association Foundation, Inc.

January 27, 2009 BIR RULING [NSNP-(S30E-002) 053-09] Section 30 Philippine Orthopaedic Association Foundation, Inc. W-2106 B, Philippine Stock Exchange Bldg., Exchange Road Ortigas Center, Bgy. San Antonio Pasig City Attention: Mr. Lauro M. Abrahan, Jr., MD Treasurer Gentlemen : This refers to your letter dated July 21, 2008 indorsed to this Office by Revenue District Officer Rey Asterio L. Tambis of Revenue District Office No. 43, Pasig City, requesting for a certificate of tax exemption in favor of Philippine Orthopaedic Association Foundation, Inc. (POAFI). Documentary evidence submitted disclosed that POA Foundation (POAFI), Inc. is a non-stock, non-profit corporation registered with the Securities and Exchange Commission under Registration No. CN200506215 dated April 14, 2005. Its primary purposes are as follows: "a. To establish, organize, maintain, support, develop and finance the objectives of the Philippine Orthopaedic Association in the field of continuing medical education for its Fellows and the active medical practitioners of the Philippines through postgraduate courses, scientific sessions, seminars and medical library. b. To promote the advancement of orthopedic art and science through research, in the basic and clinical fields of endeavor including the development of orthopedic instruments, devices and apparatuses used in the practice of orthopedic surgery. xxx xxx xxx" In reply, please be informed that Section 30 of the Tax Code of 1997 provides as follows: "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 asset 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 of their properties, real or personal, or from any of their activities conducted for profit regardless of the disposition made of such income, shall be subject to tax imposed under this Code." (Emphasis provided.) Under the above-quoted provision, a non-stock 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 is exempt from income taxation. Accordingly, as a non-stock, non-profit scientific organization, POAFI, therefore, is exempt from tax on all revenues derived in pursuance of its purpose as a scientific organization and used actually, directly and exclusively for scientific purposes. However, it is subject to internal revenue taxes on income from other activity the conduct of which is not related to the exercise or performance of its purposes or functions. Moreover it is subject to the corresponding taxes imposed under the Tax Code of 1997, as amended on its income derived from any of its properties, real or personal, regardless of the disposition thereof, which income should be returned for taxation. Likewise, interest income from its currency bank deposits and yield or any other monetary benefits from deposit substitute instruments and from trust funds and similar arrangements received by the organization, 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 28 (A) (7) (a), in relation to Section 57 (A), both of the Tax Code of 1997, as amended. Moreover, as a tax-exempt organization, POAFI should file an annual information return on or before the 15th day of the 4th month following the end of its taxable year. Under Section 235 of the Tax Code of 1997, as amended, 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 they have been granted tax exemptions or tax incentives, and their tax liabilities, if any. 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. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service