Pentecostal Free Will Baptist Church in the Philippines, Inc.

February 17, 2009 BIR RULING [NSNP-(S30E-008) 103-09] Section 30; BIR Ruling No. S30-080-2007 Pentecostal Free Will Baptist Church in the Philippines, Inc. 64 Malvar Street Baguio City Attention: Ms. Caridad S. Espina Accountant Gentlemen : This refers to your letters dated July 31, 2008 and November 14, 2008 requesting on behalf of Pentecostal Free Will Baptist Church in the Philippines, Inc. for a certificate of tax exemption. Documentary evidence submitted disclosed that Pentecostal Free Will Baptist Church in the Philippines, Inc. is a non-stock, non-profit religious corporation registered with the SEC under Registration No. 45382. It is the Philippine District Organization and affiliate of Pentecostal Free Will Baptist Church Inc. with registered office at Dunn, North Carolina, U.S.A. Its primary purpose is "to administer its temporalities and/or manage the properties or estates of the church." In reply, please be informed that paragraph 3, Section 28, Article VI of the 1987 Constitution provides, viz. : "(3) Charitable institutions, churches and parsonages or convents appurtenant thereto, non-profit cemeteries, and all lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable, or educational purposes shall be exempt from taxation." The phrase "exempt from taxation" as employed in the Constitution should not be interpreted to mean exemption from all kinds of taxes. The exemption of the church is only from the payment of taxes assessed on such properties as property taxes ( Lladoc vs. CIR , 14 SCRA 293, June 16, 1965) TSIaAc However, 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." 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 religious organization, Pentecostal Free Will Baptist Church in the Philippines, Inc., therefore, is exempt from tax on all revenues derived in pursuance of its purpose as a religious organization and used actually, directly and exclusively for religious 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. ScCIaA Moreover, as a tax-exempt organization, Pentecostal Free Will Baptist Church in the Philippines, Inc. 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, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service