Floro Noza Brosas Foundation, Inc.

July 3, 2009 BIR RULING [NSNP-(S30G-047) 422-09] DA196-06 Floro Noza Brosas Foundation, Inc. 7418 Santillan Street Barangay Pio del Pilar Makati City Attention: Mr. Bryan M. Brosas President Gentlemen : This refers to your letter dated April 29, 2009 requesting for exemption from the payment of income tax and other taxes pursuant to Section 30 of the Tax Code of 1997. It is represented that Floro Noza Brosas Foundation, Inc. is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. 141336 dated June 11, 1987; that the primary purpose for which the said corporation is organized is to conceptualize, promote and operate appropriate projects and endeavors which shall enhance the spiritual, physical, mental, social and economic well-being of the people, particularly the residents of Liliw, Laguna and other places in the Philippines; 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 as follows: Income Tax Based on the foregoing, this Office is of the opinion and so holds that the FLORO NOZA BROSAS 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. EHSTDA 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, or payment of 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) ETDHaC Donor's Tax Inasmuch as the donee is a social welfare institution, donation from its benefactors is exempt from the payment of donor's tax pursuant to Section 101 (A) (3) of the Tax Code of 1997, subject to the condition that not more than thirty percent (30%) of said gift shall be used for administration purposes. Moreover, the Deed of Donation is not subject to documentary stamp tax. However, the acknowledgement on said deed is subject to the documentary stamp tax of P15.00 imposed under Section 188 of the Tax Code of 1997, as amended. Deductibility of Donation Section 34 (H) (2) (c) of the Tax Code of 1997 provides that donations to accredited non-government organizations operated exclusively for scientific, research, educational, character-building and youth and sports development, health, social welfare, cultural or charitable purposes or a combination thereof, no part of the net income of which inures to the benefit of any private individual, shall be deductible in full. Value-Added Tax The BIR has ruled that for as long as the revenues are derived by the non-stock, non-profit organization from its "non-stock, non-profit activities" the same are exempt from the 12% VAT. Thus, in BIR Ruling No. DA263-2003 dated August 11, 2003 which is a reiteration of BIR Ruling No. 023-03 dated March 3, 2003, this Office ruled that "In the instant case, the sale of real property is not the business of Metroclub, since the real property subject of the proposed sale is being held neither for sale to customers, nor primarily for lease in the ordinary course of trade or business, the same shall be exempt from VAT pursuant to Section 109 (w) of the Tax Code of 1997, as implemented by Section 4.103-B (w) (1) of Revenue Regulations No. 7-95, as amended." Accordingly, any sale of property made by Floro Noza Brosas Foundation, Inc. in connection with its non-stock, non-profit activities and not made in the course of trade or business is not subject to VAT. EACIcH It is requested that a copy of this letter of exemption be attached to the annual information return which Floro Noza Brosas Foundation, Inc. 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 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. Moreover, income payments made to Floro Noza Brosas Foundation, Inc., as a tax-exempt corporation, is not subject to creditable withholding tax pursuant to Section 2.57.5 (B) (3) of Revenue Regulations No. 2-98, as amended. 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