Madrid Advisory Council for Rural Improvement Club Association (MACRIC), Inc.

May 17, 2010 BIR RULING [NSNP-(S30G-005) 025-10] Section 30; BIR Ruling No. DA-252-99 & S-30-095-99 Madrid Advisory Council for Rural Improvement Club Association (MACRIC), Inc. Madrid, Surigao del Sur Attention: Ms. Fe L. Daano President Gentlemen : This refers to your request for a certificate of tax exemption indorsed to this Office by Revenue Region No. 17, Butuan City. TCSEcI Documentary evidence submitted disclosed that Madrid Advisory Council for Rural Improvement Club Association (MACRIC), Inc. is a non-stock, non-profit corporation registered with the Securities and Exchange Commission (SEC) under SEC Registration No. CN200630803 dated November 16, 2006. The purposes for which it was organized are as follows: "The association which is composed of voluntary married women from different places within the 14 barangays of Madrid, Surigao del Sur who shared the same vision that is to serve others in the community, was organized and united to take lead in coordination and partnership with the barangay, LGU officials and other organization 1. Help ourselves together as one in purpose as to embody our ideals and promote our welfare 2. Develop and practice savings and frugality 3. To become self-reliant and well disciplined women in the community 4. To participate in all activities called upon by LGU and other agencies concerned 5. To serve as a voice of the mothers in formulation of policies of brgy. Administration which directly or indirectly affect the welfare of the MACRIC Association of this municipality 6. To look for ways and means to improve economic, social, moral and physical the well being of the MACRIC Association 7. To be involved in community affairs especially during fiesta and other legal holidays celebration 8. To share knowledge, talent and experience to other members of the association" In reply, please be informed that this Office cannot as yet issue the requested ruling/certificate of tax exemption because MACRIC 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. It 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. 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. ETaSDc However, MACRIC 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, the 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, as amended. Moreover, it is required to file on or before the 15th day of the fourth month following the close 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 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 MACRIC shall be constituted as a withholding agent of the government if it acts as an employer and its employees receive compensation income subject to withholding tax under Section 79 (A), Chapter XIII, Title II of the Tax Code of 1997, as implemented by Rev. Regs. No. 2-98, as amended, 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, as amended, and as implemented by Rev. Regs. No. 2-98, as amended. Finally, the corporation's books of accounts and other pertinent records shall be subject to examination by the Bureau of Internal Revenue for the purpose of ascertaining whether it is complying with the conditions under which it has been granted tax exemption and its tax liability, if any. For purposes of securing a permanent exemption after the three (3)-year period, MACRIC is required to submit the following documents pursuant to Revenue Memorandum Circular No. 14-2001: 1) SEC Registration; DTSaIc 2) Articles of Incorporation which must include the following provisions: i) that the corporation is non-stock, non-profit; 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, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) GREGORIO V. CABANTAC Deputy Commissioner Legal and Inspection Group