Philippine Constitution Association (Foundation), Inc.

March 2, 2009 BIR RULING [NSNP-(S30G-019) 160-09] 27 (D) (1); S-30-008-2006 Philippine Constitution Association (Foundation), Inc. 2nd Floor MGF-Champaca Building 156 Amorsolo Street Legaspi Village, Makati City Attention: Mr. Manuel M. Lazaro President Gentlemen : This refers to your letter dated August 6, 2008, which was referred to this Office by Revenue Region No. 8, Makati City, by way of its 2nd Indorsement dated September 19, 2008, requesting for exemption from the payment of income tax and the filing of the corresponding income tax return under Section 30 of the Tax Code of 1997. Documents submitted to this Office disclosed that the Philippine Constitution Association (Foundation), Inc. is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission with Tax Identification No. (TIN) 001-779-361-000; that the purpose(s) for which the corporation was formed are as follows: (1) To undertake studies and researches on social science and humanities pertinent to Philippines social and economic conditions and problems; establishing in these studies and researches the philosophy, aspects and historical background of constitutional provisions and constitutional processes, here and abroad, with the end in view of proposing charges and/or improvements in the constitution of the Philippines or in the methods of implementation of its provisions which could help solve said social and economic problems; (2) To undertake studies and researches on the processes that could be taken to safeguard and protect the rights of the citizens of the Philippines; and (3) To undertake studies and researches on the Constitution of the Philippines with a view to its modification to the end that it may more adequately promote the general welfare, conserve and develop the patrimony of the Nation and secure to the people of the Philippines a regime of justice, liberty and democracy. 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; and that upon dissolution, the existing assets of the corporation shall be passed on to another accredited corporation established for similar purposes or to continue the vision/mission. IcAaSD Based on the foregoing, this Office is of the opinion and so holds that the Philippine Constitution Association (Foundation), Inc. is a corporation organized for the promotion of social welfare as contemplated under Section 30 (G) of the Tax Code of 1997. Accordingly, it is exempt from the payment of income tax on income received by it as such organization, and therefore, need not file an income tax return concerning such income. However, it is subject to the corresponding internal revenue taxes imposed under the Tax Code of 1997 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 benefit 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 your corporation 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 organization or grantees of tax incentives shall be subject to examination by the BIR for purposes of ascertaining compliance with the conditions under which they have been granted tax exemptions or tax incentives, and their tax liabilities, if any. It should be understood that the said exempt organization shall be constituted as a withholding agent for 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 No. 2-98, or if it makes income payments to individuals or corporations subject to the withholding tax pursuant to Section 57 of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98, as amended. (BIR Ruling No. DA-S-30-79-98 dated December 29, 1998) CIDaTc 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service