Villamor Golf Club

August 26, 2009 BIR RULING [NSNP-(S30E-106) 528-09] 30 (E); S-30-030-2003 Villamor Golf Club Villamor Air Base Pasay City Attention: Lt. Gen. Oscar H. Rabena Chairman Gentlemen : This refers to your letter as indorsed by the Regional Director, Revenue Region No. 8, Makati City, requesting for exemption from the payment of income tax under Sec. 30 of the Tax Code of 1997. Documents submitted to this Office show that Villamor Golf Club (VGC) is a non-stock, non-profit association established primarily to develop and maintain the recreational and sports facilities of the Philippine Air Force (PAF) in Villamor Airbase, Pasay City and in the same way will support the morale and welfare programs and develop sports for active and retired members of the PAF and their dependents, club members, guests and visitors. Likewise, VGC was organized as a response to social services, civil-military operations through golf competition and tournaments, and promote the ecological development of golf in the country. The association is not founded for purposes of profit or business and that the attendant revenues from registration fees, proceeds from rents of facilities, earnings from fund-raising activities are dispensed for the necessary expenses of administration, maintenance and management, upgrading of club facilities and services, and other related operational expenses of VGC. The income in excess or net income/asset out of the returns generated by VGC are earmarked for the development of the club facilities. To date and out of its various previous development projects, it has contracted some monetary contractual obligations and with existing account payables. TIHCcA The facilities of VGC are government properties under the ownership and possession of the Armed Forces of the Philippines (AFP). The foregoing properties and all its incidental revenues and benefits are actually, primarily, and exclusively devoted to the maintenance of its recreational and sports facilities to support the morale and welfare programs and promote the general interests of its personnel. In reply, please be informed that this Office cannot as yet issue the requested ruling/certificate of tax exemption. VGC has 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. It must file the necessary annual information return instead of an income tax return on or before April 15 of each year following the start of its operation as an exempt organization as required under Sec. 24 of Revenue Regulations No. 2, based on such information return, our Revenue District Office (RDO) which has jurisdiction over the place where the corporation's principal office is located shall conduct the necessary investigation on its activities undertaken during the period. The letter of exemption shall thereafter be issued depending upon the result of our investigation. However, VGC 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 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 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 the interest income the corporation 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, as amended. Moreover, VGC is required to file on or before the 15th day of the fourth month following the end of its 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. EcHIAC It should be understood that VGC 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, or if it makes payments to individuals or corporations subject to the withholding tax provided for in Section 57 of the Tax Code of 1997, as amended. In addition, its 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 it has complied with the conditions under which it may be granted tax exemption or tax incentives; and that it has paid tax liability, if any, pursuant to Section 235 of the Tax Code of 1997, as amended. This ruling is being issued on the basis of the foregoing facts as presented. 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