Philbaking Industry Group, Inc.

March 17, 2009 BIR RULING [NSNP-(S30G-027) 217-09] Section 30 (G); DA-467-07 Philbaking Industry Group, Inc. Unit 1805, Cityland Tower 1, Cityland 10 Makati City, Philippines Attention: Mr. Simplicio P. Umali, Jr. President Gentlemen : This refers to your letter dated June 21, 2008 requesting for the issuance of a certificate of exemption as a tax exempt corporation. STaCIA Documentary evidence submitted disclosed that the PHILBAKING INDUSTRY GROUP, INC. is a non-stock, non-profit corporation registered with the Securities and Exchange Commission under SEC Registration No. CN200718848 dated December 10, 2007; and that the purposes for which the corporation is organized, among others are as follows, viz. : a. To ensure continuous growth of the baking industry through stimulating the continual growth of its markets; b. To represent the industry and its interests with government and regulatory agencies, as well as foreign governments; c. To represent the industry with related industries, the supply chain, equipment suppliers and manufacturers, and foreign sources; d. To represent the industry with corporations, organizations in the field of retail, wholesale, and distribution, and industry associations. 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 PHILBAKING INDUSTRY GROUP, 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. CAaEDH 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 7 1/2% 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 PHILBAKING INDUSTRY GROUP, 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, PHILBAKING INDUSTRY GROUP, 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) IaHCAD 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) 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