Atty. Florecita P. Flores

May 4, 2010 BIR RULING [NSNP-(S30G-003) 019-10] Sec. 30; Sec. 101; DA-471-98; S-30-008-03; S-30-100-00; ECCP-23-2000 Atty. Florecita P. Flores 7307 Cypress St.,Marcelo Green Village Paraaque City, 1700 Gentlemen : This refers to your letter dated January 22, 2010 requesting in behalf of your client, FFCCCII Foundation, Inc., confirmation of its tax exempt status pursuant to Section 30 of the Tax Code of 1997, as amended. ETDAaC It is represented that FFCCCII Foundation, Inc. with TIN 007-557-684 is a non-stock, non-profit organization registered with the Securities and Exchange Commission under SEC Registration No. 201000026 dated January 14, 2010; and that the purposes for which the organization is organized, among others are as follows, viz. : 1. To support the construction of school buildings in barangays, towns and/or cities, to supplement the policy of the Philippine Government to promote education throughout the nation; 2. To undertake charitable, social and civic programs such as medical missions; and devise ways and means to enhance the funds of the association; 3. To carry out any lawful and beneficial project or activity reasonably necessary or proper for the accomplishment of any or all the foregoing purposes. In reply, please be informed that this Office cannot as yet issue the requested ruling/certificate of tax exemption. You have to prove by actual operation for at least three (3) years that you are really an organization/association exempt from income tax under Section 30 of the Tax Code of 1997, as amended. You 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 year following the start of your 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).Based on such information return, we shall conduct the necessary investigation on your activities undertaken during the period. The letter of exemption shall thereafter be issued depending upon the result of our investigation. However, the FFCCCII Foundation, Inc. shall be subject to the corresponding internal revenue taxes imposed under the Tax Code of 1997, as amended, on 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 and from trust funds and similar arrangements, and royalties derived from sources within the Philippines are subject to 20% final withholding tax: provided, however, that interest income it derives from a depository bank under the expanded foreign currency deposit system shall be subject to a final withholding tax of 71/2% pursuant to Section 27 (D) (1) in relation to Section 57 (A) 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 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 FFCCCII Foundation, Inc. shall be constituted as a withholding agent for the government if it acts as an employer and any of its employees receives compensation income subject to withholding tax under Section 79 (A), Chapter XIII, Title II of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98, or if it makes income payments to individuals or corporations subject to the withholding tax provided for in Section 57 of the Tax Code of 1997, also as implemented by Revenue Regulations No. 2-98. (BIR Ruling No. S-30-008-2003 dated April 2, 2003) Moreover, Section 105 of the Tax Code of 1997, as amended, 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 Section 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. Accordingly, being a non-stock, non-profit corporation, FFCCCII Foundation, Inc. shall be subject to the value-added tax if it engages in the regular conduct or pursuit of a commercial or economic activity, including transactions incidental thereto. (BIR Ruling No. S-30-100-2000 dated December 26, 2000) Finally, your books of accounts and other pertinent records shall be subject to periodic examination by revenue enforcement officers of this Bureau for the purpose of ascertaining whether you have been complying with the conditions under which you may be granted tax exemption or tax incentives and tax liability, if any, pursuant to Section 235 of the Tax Code of 1997. (BIR Ruling No. ECCP-23-2000 dated May 12, 2000) For purposes of securing a permanent exemption after the three (3)-year period, you are required to submit the following documents pursuant to Revenue Memorandum Circular No. 14-2001: 1) SEC Registration; 2) Articles of Incorporation which must include the following provisions: i) that the corporation is non-stock, non-profit; cTECIA ii) that the primary purpose for which it was created is one of those enumerated under Section 30 of the Tax Code of 1997; iii) that no part of the net income shall inure to the benefit of any of its members; iv) that the trustees do not receive any compensation; and v) 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 (balance sheet) 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 disclosed that the facts are different, this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service