ICI Ministries Inc.

October 16, 2009 BIR RULING [NSNP-(S30E-132) 649-09] BIR Ruling No. DA-408-04, DA-165-05, DA-601-06, S30-080-07 ICI Ministries Inc. ICI PNO: P.O. Box 13461 Ortigas Center 1605 Pasig City Attention: Mr. Michael James Williams President Mr. Peter Banzon Corporate Secretary Gentlemen : This refers to your letter dated April 20, 2009 requesting for confirmation of your opinion that ICI Ministries Inc. ("ICI" for brevity) is exempt from the following taxes (a) the 20% and 7-1/2% final withholding tax; (b) donor's tax; and (c) value-added tax. TAHcCI As represented, ICI, with Taxpayer Identification No. 207-994-393-000, is a non-stock, non-profit religious organization, duly organized and existing under the laws of the Republic of the Philippines, with principal address located at BBC Compound, Governor I, Santiago St.,Malinta, Valenzuela City. It is registered with the Securities and Exchange Commission (SEC) under SEC Registration No. A200014460 dated October 3, 2000. The primary purpose for which it is was organized is "to administer the properties and temporalities of the church and incidental thereto, to propagate the message of new life in Christ Jesus by reaching out to people in the Philippines and other parts of the world". On August 18, 2004, the BIR Revenue Region No. 5 issued RDA-RR-5-3 BIR Ruling No. 067-04 granting ICI exemption from payment of income tax. We reply as follows: ICI is subject to the 20% and 7-1/2% Final Withholding Tax. The interest income from ICI's 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, the 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. Donation to ICI is exempt from donor's tax subject to a condition. Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited nongovernment organization, trust or philanthropic organization or research institution or organization is exempt from the payment of the donor's tax pursuant to Section 101 (A) (3) and (B) (2) of the Tax Code of 1997, as amended, subject to the condition that not more than 30% of said gift shall be used by the donee for administration purposes. aHTDAc Inasmuch as ICI is a religious organization, any donation to it is exempt from the payment of donor's tax pursuant to the above provisions of the Tax Code subject to the condition that not more than thirty percent (30%) of said gift shall be used by the donee for administration purposes. In case of donation of real property, the Register of Deeds shall annotate this condition at the back of the Transfer Certificate of Title because failure to comply with the said condition shall be a ground for the revocation of the donation pursuant to Article 764 of the New Civil Code. If the donor is a value-added tax (VAT) registered person and the donation is an ordinary asset, the donation is subject to VAT pursuant to Section 4.106-7 of Revenue Regulations No. 16-2005, the same being considered a transaction deemed sale. If the donor is not a VAT registered person, the donation is exempt from VAT. If the same property acquired by gift is subsequently conveyed by way of sale or exchange, the sale will be subject to corporate income tax on the gain realized which is determined by deducting from the gross selling price the historical cost or the adjusted basis thereof, as it would be in the hands of the donor, pursuant to Section 27 in relation to Section 101, both of the Tax Code of 1997, as amended, and consequently to the creditable expanded withholding tax under Revenue Regulations No. 2.57.2 of Revenue Regulations No. 2-98, as amended. If ICI donates the same property donated to it to a nonexempt donee, it shall be liable for donor's tax pursuant to Section 98 of the Tax Code of 1997, as amended. However, this Office does not issue general exemption. A ruling is issued on a per transaction and case to case basis. A taxpayer applying for tax exemption has to submit supporting documents i.e. ,Deed of Donation, Transfer Certificate of Title, and Tax Declaration together with his/its letter-request in order for this Office to assess the transaction before it can issue a ruling granting tax exemption. cETDIA ICI is subject to VAT. The tax exemption granted to a non-stock, non-profit corporation, like ICI, under Section 30 of the Tax Code of 1997, as amended, covers only income taxes for which it is directly liable. It should be noted that VAT is an indirect tax payable by the seller and not by the purchaser of goods. However, being an 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/customer as an addition to the cost of goods or services sold, it is no longer a tax but an additional cost which the buyer/customer has to pay in order to obtain the goods or services. The shifting of the VAT to the non-stock, non-profit corporation does not make it directly liable and therefore, it cannot invoke its tax exemption privilege under Section 30 to avoid the passing on or shifting of the VAT (cited in BIR Ruling No. DA-165-05 dated April 18, 2005). Section 4.101-1 of Revenue Regulations No. 7-95 provides that "the VAT is imposed on goods and properties brought into the Philippines, whether for use in business or not. The tax shall be based on the total value, used by the Bureau of Customs in determining tariff and customs duties, plus customs duties, excise tax, if any, and other charges prior to the release of the goods or properties from customs custody such as postage, commissions, and other similar charges. . . ." (VAT Ruling No. 057-98 dated November 18, 1998). Hence, notwithstanding that ICI is a non-stock, non-profit corporation, any donation in the form of goods/properties shipped from abroad shall nevertheless be subject to the 10% VAT. 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