Jesus the Exalted Savior Christian Ministry Inc.

December 21, 2009 BIR RULING [NSNP-(S30E-156) 799-09] Sec. 30 (E) Jesus the Exalted Savior Christian Ministry Inc. (Formerly Covenant of Praise Christian Ministry, Inc.) Mitchell Extension, Balibago, Angeles City Attention: David O. Concina, Jr. Head Pastor Gentlemen : This refers to your letter dated June 16, 2009, requesting tax exemption under Section 30 of the Tax Code of 1997, as amended. It is represented that Jesus the Exalted Savior Christian Ministry Inc. with Taxpayer Identification No. 218-575-858-000, is a non-stock, non-profit corporation registered with the Securities and Exchange Commission (SEC) with SEC Registration No. ANO92-0000000973 dated March 6, 1992; that the purpose of this religious corporation is for the administration of its affairs, properties and temporalities; that the funds of the corporation mainly come from pledges and love gifts; that no part or portion of the income or assets of the corporation shall belong or inure to the benefit of any of its members; and that in support of your request, you submitted the following documents: 1) Certificate of SEC Registration; 2) Amended Articles of Incorporation; 3) Amended By-laws; and 4) Audited financial statements for taxable years 2007 and 2008. In reply, please be informed as follows: Income Tax Based on the foregoing, this Office is of the opinion that Jesus the Exalted Savior Christian Ministry Inc. is a corporation organized for religious purposes as contemplated under Section 30 (E) of the Tax Code of 1997, as amended. Accordingly, it is exempt from the payment of tax on income received by it as such organization, and therefore, need not file an income tax return concerning such income. DTSIEc However, Jesus the Exalted Savior Christian Ministry Inc. is subject to the corresponding internal revenue taxes imposed under the National Internal Revenue Code 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 benefits from deposit substitute instruments and from trust funds and similar arrangements, and royalties derived from sources within the Philippines are subject to the 20% final withholding tax: provided, however, that 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 27 (D) (1),in relation to Section 57 (A),both 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 the 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 said exempt organization shall be constituted as withholding agent of the government if it acts as an employer and its employees receive compensation income subject to the withholding tax under Section 79 (A), Chapter XIII, Title II of the Tax Code of 1997, as implemented by Revenue Regulations (Rev. Regs.) No. 2-98, as amended, 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, also as implemented by Rev. Regs. No. 2-98, as amended (BIR Ruling No. S30-047-01 dated June 5, 2001) . Under Section 235 of the Tax Code of 1997, any provision of existing general and special law to the contrary notwithstanding, the books of accounts and other pertinent records of tax-exempt organization or grantees of tax incentives shall be subject to examination by the BIR for purposes of ascertaining compliance with the conditions under which it has been granted tax exemptions or tax incentives, and its tax liabilities, if any. VAT Moreover, the tax exemption granted to it as a non-stock, non-profit corporation under Section 30 of the Tax Code of 1997 covers only income taxes for which it is directly liable. TaHIDS Section 105 of the Tax Code of 1997 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 Sections 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. 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. Thus, the shifting of the VAT to it does not make it the person directly liable and therefore, it cannot invoke its tax exemption privilege under Section 30 of the Tax Code of 1997 to avoid the passing on or shifting of the VAT. Accordingly, if Jesus the Exalted Savior Christian Ministry Inc. is engaged in the sale of goods or services in the course of a business pursuit, including transactions incidental thereto, in general, it shall also be liable for VAT (BIR Ruling No. S30-27-2003 dated November 21, 2003 & DA-043-2004 dated February 4, 2004) . Likewise, revenue from contributions and donations, not being derived from sale of services or sale of goods made in the course of business but rather in connection with its non-stock, non-profit activities, is exempt from the 12% VAT. Hence, notwithstanding that it is a non-stock, non-profit corporation, its purchase of goods or properties or services and importation of goods shall nevertheless be subject to the 12% VAT pursuant to Section 107 of the said Code (VAT Ruling No. 119-90 dated May 14, 1990 and BIR Ruling No. DA-043-2004 dated February 4, 2004) . Donor's Tax Inasmuch as Jesus the Exalted Savior Christian Ministry Inc. is a religious organization, donations to it are exempt from the payment of donor's tax pursuant to Section 101 (A) (3) of the Tax Code of 1997, subject to the condition that not more than thirty percent (30%) of said gift shall be used for administration purposes. SDHCac Deductibility of Donation Section 34 (H) (1) of the Tax Code of 1997 provides that for contributions or gifts actually paid or made within the taxable year to, or for the use of corporations or associations organized and operated exclusively for religious purposes, its donors shall be entitled only to limited deductions in an amount not in excess of 10% in case of an individual and 5% in the case of a corporation, of the taxpayer's taxable income. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained 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