Small Enterprises Research and Development Foundation of the Philippines (SERDEF)

March 3, 2009 BIR RULING [NSNP-(S30G-021) 178-09] Section 30 (G); DA-467-07 Small Enterprises Research and Development Foundation of the Philippines (SERDEF) E.T. Virata Hall, E. Jacinto Street, U.P. Campus Diliman, Quezon City Attention: Mr. Francisco R. Floro Chairman Gentlemen : This refers to your letter dated March 9, 2007 requesting for exemption from the payment of the percentage tax, exemption from the 2% creditable withholding tax, its registration as a non-VAT entity and as a donee institution. Documentary evidence submitted disclosed that Small Enterprises Research and Development Foundation of the Philippines (SERDEF) with TIN 001-628-012-000 is a non-stock, non-profit corporation registered with the Securities and Exchange Commission; and that the purposes for which the corporation is organized are all stated in the Articles of Incorporation. Based on the foregoing, this Office is of the opinion and so holds that the SERDEF falls within the purview of a civic league or organization not organized for profit 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. However, it is subject to the corresponding internal revenue taxes imposed under the National Internal Revenue 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 April 15 of each year 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. THEDCA It should be understood that the said exempt organization/foundation shall be constituted as 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, also as implemented by Revenue Regulations No. 2-98. It is of course understood that 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 have been granted tax exemption or tax incentives and your tax liabilities, if any, pursuant to Section 235 of the Tax Code of 1997. As regards your request that SERDEF be registered as a donee institution, registration and accreditation should be made with the Philippine Council for NGO Certification. Lastly, with regard to SERDEF's non-VAT registration, please be advised your exemption covers only income taxes, this does not include other internal revenue taxes like the value-added tax or percentage tax. 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service