Friars Minor Southern Philippines, Inc.

December 22, 2009 BIR RULING [NSNP-(S30E-158) 806-09] Sec. 30 (E); DA-032-03 Friars Minor Southern Philippines, Inc. St. Francis of Assisi Friary 2 Capricorn Street, Pleasant Homes Subdivision, Punta Princesa, Cebu City Attention: Rev. J. Calvin Bugho, OFM Vicar-Custos Gentlemen : This refers to your letter dated February 24, 2009 received by this Office on September 17, 2009 by way of 1st Indorsement dated August 12, 2009 from Revenue Region 13-Cebu City, requesting tax exemption under Section 30 of the Tax Code of 1997, as amended. It is represented that Friars Minor Southern Philippines, Inc. with Taxpayer Identification No. 270-421-176-000, is a non-stock, non-profit corporation registered with the Securities and Exchange Commission (SEC) with SEC Registration No. CN200729706 dated August 23, 2007; that the religious corporation was organized to undertake "ministerial, church, humanitarian, social welfare, philanthropic and charitable activities";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 that based on the foregoing, this Office cannot as yet issue the requested certificate of tax exemption because Friars Minor Southern Philippines, Inc. has yet 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 (E) of the Tax Code of 1997, as amended. Friars Minor Southern Philippines, 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 (Rev. Regs.) No. 2 (Collector vs. Sinco, G.R. No. L-9276 dated October 23, 1956) .Based on such information return, we shall conduct the necessary investigation on the activities undertaken during the period. The letter of exemption shall thereafter be issued depending upon the result of our investigation. aCTcDS However, Friars Minor Southern Philippines, 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. Finally, for purposes of securing a permanent exemption after the three (3)-year period, Friars Minor Southern Philippines, Inc. is required to submit the following documents pursuant to Revenue Memorandum Circular No. 14-2001: TAcSCH 1) SEC Registration; 2) Articles of Incorporation which must include the following provisions: a. That the corporation is non-stock, non-profit; b. That the primary purpose for which it was created is one of those enumerated under Section 30 of the Tax Code of 1997; c. That no part of the net income shall inure to the benefit of any of its members; d. That the trustees do not receive any compensation; e. In case of dissolution, assets of the corporation shall be transferred to similar institution or to the government; 3) By-laws; 4) Annual Information Returns for the past three (3) years; and 5) Financial Statements for the past three (3) years. 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