Kakhawan, Inc.

December 4, 2009 BIR RULING [NSNP-(S30E-146) 747-09] Section 30 (E); S-30-023-99 Kakhawan, Inc. Sitio Malasa, Barangay Anupul Bamban, Tarlac Attention: The Board of Trustees Gentlemen : This refers to your letter dated December 9, 2008 requesting, in effect, for exemption from the payment of income tax pursuant to Section 30 (E) of the National Internal Revenue Code of 1997, as amended. HEAcDC Documents submitted disclosed that KAKHAWAN, INC. with TIN No. 007-177-143-000, is a non-stock, non-profit organization organized and operated exclusively for cultural purposes. More particularly, the purposes for which KAKHAWAN, INC. is incorporated are: 1. Ensuring the security of the resources and materials needed for the sustenance and development of life among Aeta Magan-tse community members; 2. Partaking in the responsibility of the protection and development of Aeta Magan-tse Ancestral Domain; 3. Development and enrichment of Aeta Magan-tse culture, and passing it on the next generations thru living out, studying, analyzing, and documenting Magan-tse culture; 4. Responding to basic needs thru indigenous methodologies, means and resources, before tapping for support from the government and non-government organizations; 5. Leading and managing our members within the Ancestral Domain in an effective, efficient, participatory, democratic and self-determined manner. This includes communicating with other groups from within and outside the Ancestral Domain, and abiding to the policies promulgated by the group and of the other groups involved; and 6. Overall protection, development, and insurance of ownership of Ancestral Domain thru integrated development strategies and programs. In reply, please be informed that this Office cannot as yet issue the requested ruling/certificate of tax exemption because KAKHAWAN, INC. 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. KAKHAWAN, INC. 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 preceding accounting period following the start of its 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). TEaADS Based on such information return, we shall conduct the necessary investigation on the activities undertaken by KAKHAWAN, INC. during the period. The determination letter of exemption shall thereafter be issued depending upon the result of our investigation. However, KAKHAWAN, INC. 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 are subject to 20% final withholding tax as well as its interest income under the expanded foreign currency deposit system which are subject to a final withholding tax of 7 1/2% pursuant to Section 27 (D) (1) in relation to Section 57 (B) of the Tax Code of 1997, as amended. Moreover, it is required to file on or before the 15th day of the fourth month of the preceding 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 year 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 KAKHAWAN, INC. shall be constituted as withholding agent of the government if it acts as an employer and any of its employee receives compensation income subject to withholding tax, or if it makes income payments to individuals or corporations subject to the expanded withholding tax provided for in Section 57 (B) of the Tax Code of 1997. (BIR Ruling No. S-30-023-99 dated March 15, 1999) 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. IDScTE Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service