Bahay Maria, Inc.

January 27, 2009 BIR RULING [NSNP-(S30E-003) 054-09] 30 (E);S-30-011-2006 Bahay Maria, Inc. 95 Amapola Street Bel-Air III, Makati City Attention: Carmela M. Borres Executive Director Gentlemen : This refers to your letter dated October 18, 2006 requesting for exemption from the payment of income tax and filing of the corresponding income tax return under Section 30 of the Tax Code of 1997 and from the value-added tax (VAT). aTEHCc Documentary evidence submitted to this Office disclosed that Bahay Maria, Inc. is a non-stock, non-profit charitable corporation duly registered with the Securities and Exchange Commission under SEC Registration No. 158513 dated May 21, 2001; that it is established to help and care abandoned, rejected and marginalized street children; that no part of the income shall inure to the benefit of any members or trustees; and that it is going to hold a conference on November 19, 2006 at the PICC in celebration of the Day of Eucharistic Renewal with Anne, a lay Apostle, the proceeds thereof will go to the support of the abandoned, rejected and marginalized street children. In reply, please be informed as follows: Income Tax Based on the foregoing, this Office is of the opinion and so holds that Bahay Maria, Inc. is a corporation organized for charitable purposes as contemplated under Section 30 (E) of the Tax Code of 1997, as amended. Accordingly, it is exempt from the payment of income tax on income received by it as such organization, and therefore, need not file an income tax return concerning such income. However, it is subject to the corresponding internal revenue taxes imposed under the Tax Code of 1997, as amended, 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 benefit 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. ACSaHc It is requested that a copy of this letter of exemption be attached to the Annual Information Return which your corporation will file on or before the 15th day of the fourth month of each 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 organization 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. It should be understood that Bahay Maria, Inc. shall be constituted as a withholding agent for the government if it acts as an employer and any of its employee receives compensation income subject to withholding tax under Sec. 79 (A), Chapter XIII, Title II of the Tax Code of 1997, as amended, and implemented by Revenue Regulations No. 2-98, as amended or if it makes income payments to individuals or corporations subject to the withholding tax provided for in Section 57 of the Tax Code of 1997, as amended also as implemented by Revenue Regulations No. 2-98, as amended. VAT Moreover, under Section 105 of the Tax Code of 1997, as amended, VAT is collected upon any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties and renders service. The phrase "in the course of trade or business" means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a non-stock, non-profit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests),or government entity. Considering that Bahay Maria, Inc. will not sell, barter, exchange, lease any goods or property and will not render service for a fee but merely collect registration fee of the said conference to support its charitable activities pursuant to its corporate purposes thereof, is not subject to VAT on such activity. (BIR Ruling No. S-30-011-2006 dated March 27, 2006) Moreover, the exemption from the 12% VAT does not extend to its purchases of goods or properties or services and importation of goods. Hence, notwithstanding that it is a non-stock, non-profit corporation, its purchases of goods or properties or services and importation of goods shall nevertheless be subject to the 12% VAT pursuant to Section 107 of the Tax Code of 1997, as amended. CaESTA It should be noted that VAT is an indirect tax payable by the seller and not by the buyer/purchaser of goods. However, being indirect tax, it can be shifted or passed on to the buyer/purchaser, transferee or lessee of the goods, properties or services. Once shifted to the buyer/purchaser as an addition to the cost of the goods or services sold, it is no longer a tax but an additional cost which the buyer/purchaser has to pay in order to obtain the goods or services. 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, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service