Association Compassion Asian Youth, Inc.

February 16, 2009 BIR RULING [NSNP-(S30G-013) 100-09] Section 30; S30-027-2006 Association Compassion Asian Youth, Inc. 5 Alley 4 Project 6 1100 Quezon City Attention: Sister Sophie Renoux Resident Agent Gentlemen : This refers to your letter dated December 17, 2007, which was referred to this Office by Revenue Region No. 7, Quezon City, requesting for exemption from the payment of income tax and filing of the corresponding income tax return under Section 30 of the Tax Code of 1997. Documentary evidence submitted to this Office disclosed that the Association Compassion Asian Youth, Inc. is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission (SEC) under SEC Reg. No. FN200713280 dated August 23, 2007; that the purposes for which the corporation was organized are the following, viz. : (1) To provide community programs for children in conflict with the law; (2) To provide residential program for girls who need protection. and that no part of the income which the corporation may obtain as an incident to its operation shall be distributed as dividends to its members, trustees or officers. In reply thereto, please be informed that this Office cannot as yet issue the requested ruling/certificate of tax exemption because the Association Compassion Asian Youth, Inc. 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. The Association Compassion Asian Youth, 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 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 determination letter of exemption shall thereafter be issued depending upon the result of our investigation. SDHTEC However, it 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 is requested that a copy of this letter of exemption be attached to the annual information return which you will file on or before the 15th day of the fourth month of each year. 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 organizations or grantee 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. It should be understood that the said exempt non-government organization shall be constituted as withholding agent of the government if it acts as an employer and its employee receives 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. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service