Order of Carmelites (Calced Carmelites, Inc.)

December 16, 2009 BIR RULING [NSNP-(S30E-153) 789-09] Section 30; BIR Ruling No. S30-080-2007 Order of Carmelites (Calced Carmelites, Inc.) 3/F Teresa of Avila Bldg., 28 Acacia St. New Manila, Quezon City Attention: Fr. Artemio D. Jusayan, O.Carm. Commissary Provincial Gentlemen : This refers to your letter dated July 7, 2009, indorsed to this Office by BIR Revenue District Office No. 40, Cubao, Quezon City, requesting on behalf of the Commissary Provincial, Chief Priest, or Head of the Calced Carmelites Inc. for a certificate of tax exemption. CASTDI Documentary evidence submitted disclosed that you are a religious corporation sole. You are registered with the Securities and Exchange Commission (SEC) under SEC Registration No. 94434 dated August 11, 1980. Your sole purpose is "the administration of the temporalities and the management of the estates and properties of the 'Brothers of the Blessed Virgin Mary of Mount Carmel' within the territorial jurisdiction of the Republic of the Philippines." 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) 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." AIcECS 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, you are, therefore, exempt from tax on all revenues derived in pursuance of your purpose as a religious organization and used actually, directly and exclusively for religious purposes. However, you are subject to internal revenue taxes on income from other activity the conduct of which is not related to the exercise or performance of your purposes or functions. Moreover you are subject to the corresponding taxes imposed under the Tax Code of 1997, as amended, on your income derived from any of your properties, real or personal, regardless of the disposition thereof, which income should be returned for taxation. Likewise, interest income from your currency bank deposits and yield or any other monetary benefits from deposit substitute instruments and from trust funds and similar arrangements you receive, and royalties derived from sources within the Philippines are subject to the 20% final withholding tax: provided, however, that interest income you derive 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. ASHEca Moreover, as a tax-exempt organization, you should file an annual information return on or before the 15th day of the 4th month following the end of your 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. HOWEVER, this ruling is subject to the condition that you submit a copy of your 2006 Financial Statements and Annual Information Returns for the past three (3) years of operation in compliance with RMC No. 14-2001. 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