FICCO Mutual Benefit Association (FICCO MBA), Inc.

March 5, 2009 BIR RULING [NSNP-(S30E-032) 189-09] Section 30 (E); DA-467-07 FICCO Mutual Benefit Association (FICCO MBA),Inc. Corrales-Fernandez Sts.,Cagayan de Oro City Attention: Mr. Edgardo A. Micayabas FICCO MBA-Manager Gentlemen : This refers to your letter dated December 4, 2007 requesting for the issuance of a certificate of exemption as a tax exempt corporation. Documentary evidence submitted disclosed that the FICCO Mutual Benefit Association, Inc. is a non-stock, non-profit corporation registered with the Securities and Exchange Commission under SEC Registration No. CN200713117 dated August 23, 2007; and that the purposes for which the corporation was organized, among others are as follows, viz. : a. To extend financial assistance to its members, spouse, children and parents in the form of death benefits, sickness benefits, provided savings and loan redemption assistance; b. To ensure continued access to benefits/resources by actively involving the members in the management of the association that will include implementation of policies and procedures geared towards sustainability and improved services. In reply, please be informed that this Office cannot as yet issue the requested ruling/certificate of tax exemption. You have to prove by actual operation for at least three (3) years that you are really an organization/association exempt from income tax under Section 30 of the Tax Code of 1997, as amended. You 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 year following the start of your operation as an exempt organization as required under Section 24 of Revenue Regulations No. 2 ( Collector vs. Sinco, G.R. L-9276 dated October 23, 1956).Based on such information return, we shall conduct the necessary investigation on your activities undertaken during the period. The determination letter of exemption shall thereafter be issued depending upon the result of our investigation. EHCDSI However, the FICCO Mutual Benefit Association, Inc. shall be subject to the corresponding internal revenue taxes imposed under the Tax Code of 1997, as amended, on 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 20% final withholding tax: provided, however, that interest income it derives from a depository bank under the expanded foreign currency deposit system shall be subject to a final withholding tax of 7 1/2% pursuant to Section 27 (D) (1) in relation to Section 57 (A) of the Tax Code of 1997. 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 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. It should be understood that the FICCO Mutual Benefit Association, Inc. shall be constituted as a withholding agent for the government if it acts as an employer and any of its employees receives compensation income subject to withholding tax under Section 79 (A), Chapter XIII, Title II of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98, 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, also as implemented by Revenue Regulations No. 2-98. (BIR Ruling No. S-30-008-2003 dated April 2, 2003) Moreover, Section 105 of the Tax Code of 1997, as amended, provides that any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value-added tax (VAT) imposed in Section 106 to 108 of the same Code. 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. DcSTaC Accordingly, being a non-stock, non-profit corporation, FICCO Mutual Benefit Association, Inc. shall be subject to the value-added tax if it engages in the regular conduct or pursuit of a commercial or economic activity, including transactions incidental thereto. (BIR Ruling No. S-30-100-2000 dated December 26, 2000) Finally, your books of accounts and other pertinent records shall be subject to periodic examination by revenue enforcement officers of this Bureau for the purpose of ascertaining whether you have been complying with the conditions under which you may be granted tax exemption or tax incentives and tax liability, if any, pursuant to Section 235 of the Tax Code of 1997. (BIR Ruling No. ECCP-23-2000 dated May 12, 2000) 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, this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service