Mindanao Tribal Association of Ata-Manobo (MITRAAM), Inc.

January 7, 2009 BIR RULING [NSNP-(S30E-003) 006-09] Sec. 30 (E) Mindanao Tribal Association of Ata-Manobo (MITRAAM),Inc. B16 L18 Isaiah St.,Emily Homes Subd., Cabantian District, Davao City Attention: Mr. Jose E. Amban President Gentlemen : This refers to your letter dated November 4, 2008 requesting for exemption from income tax under Section 30 of the Tax Code of 1997 as amended. ETHSAI It is represented that MINDANAO TRIBAL ASSOCIATION OF ATA-MANOBO (MITRAAM),INC. is a non-stock, non-profit organization registered with the Securities and Exchange Commission (SEC) with SEC Registration No. CN200827074 dated April 4, 2008 that the purposes for which it was organized are as follows: 1. To develop a well-balanced Ata-Manobo community with good and harmonious relationship among members as well as to those belonging to Christian and non-Christian communities; 2. To promote equality among peoples and develop their social, political, economic, welfare, security and health conditions; 3. To introduce livelihood projects for the benefits and upliftment of the members' economic conditions by being the initiator, conduit, agent or implementor of livelihood projects offered by the government, government financed institutions and controlled corporations; 4. To accept donations, money or its equivalent value in the Philippines and in foreign countries from well-meaning donors; 5. To promote planned thrift and saving programs among its members and initiate fund raising activities for the benefit of the association members; 6. To inculcate self-discipline on taking charge of the responsibilities for the common good of all members of the association; cEaCAH 7. To provide leadership training in the advancement of cultural communities in the locality; 8. To inculcate respect for human dignity through the observance of law, ordinance, rules and regulations promulgated by the duly constituted authorities coupled with the end of preserving the culture, customs and traditions of Ata-Manobo; 9. To promote educational advancement by providing scholarship programs to deserving members; 10. To serve the best interest and welfare of all the members by protecting and upholding their rights and privileges. that whatever funds that will be raised/solicited by the association will solely be used for the projects/activities of the association in accordance with the purposes for which the association was established; that no part of the income which the association may obtain as an incident to its operation shall inure to the benefit of any individual or member; and that the association has not filed any request for tax exemption with any office of the BIR. TAIcaD In reply, please be informed that this Office cannot as yet issue the requested ruling/certificate of tax exemption because MITRAAM has yet to prove by actual operation for at least three (3) years that it is really an organization/association exempt from income tax under Section 30 of the Tax Code of 1997, as amended. MITRAAM can file the necessary annual information return instead of an income tax return on or before the 15th day of the fourth month of the preceding accounting period following the start of its operation as an exempt organization as required under Section 24 of Revenue Regulations (Rev. Regs.) No. 2 (Collector vs. Sinco, G.R. No. 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. However, MITRAAM is 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. 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, as amended. 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. ITAaHc It should be understood that MITRAAM shall be constituted as withholding agent for the government if it acts as an employer and its employees receive 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 Regulation 2-98, or if it makes income payments to individuals or corporations subject to the withholding tax pursuant to Section 57 of the Tax Code of 1997, also as implemented by Revenue Regulation 2-98 (BIR Ruling No. S-30-008-2003 dated April 2, 2003). Furthermore, under Section 235 of the Tax Code of 1997, the books of accounts and other pertinent records of MITRAAM shall be subject to examination by the BIR for purposes of ascertaining compliance with the conditions under which it has been granted tax exemption or tax incentives, and its tax liabilities, if any. DaAISH Finally, for purposes of securing a permanent exemption after the three (3)-year period, MITRAAM is required to submit the following documents pursuant to Revenue Memorandum Circular No. 14-2001: 1) SEC Registration 2) Amended Articles of Incorporation which must include 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 Section 30 of the Tax Code of 1997; 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; e. In case of dissolution, assets of the corporation shall be transferred to similar institution or to the government; 3) By-laws; 4) Annual Information Returns for the past three (3) years; and 5) Financial Statements for the past three (3) years. 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