A.Q. Ancheta & Partners

July 22, 2009 BIR RULING [NSNP-(S30G-053) 449-09] Section 30; BIR Ruling No. S30-085-99 A.Q. Ancheta & Partners Suites 1008-1010 Paragon Plaza 162 EDSA cor. Reliance St. Mandaluyong City Attention: Atty. Marie Jo Hiponia-Millendez Atty. Paula Katherina A. Gan Gentlemen : This refers to your letter dated April 23, 2009 requesting for tax exemption. Documents show that the Philippine Confederation of Industrial Gases, Inc. ("Federation" for brevity) is a non-stock, non-profit association registered with the Securities and Exchange Commission (SEC) under SEC Registration No. CN200405310 dated April 15, 2004. Its purposes are as follows: "To promote general safety, health and environment awareness so that occupational injuries and illnesses will be minimized, environmental damage is avoided, security of hazardous materials is assured and continuous improvement of performance in these areas is achieved. In connection therewith, to provide standards, information and recommendations based on international codes to local organizations of their use and guidance in the drafting of laws and regulations that will be both practical and effective; to promote harmonization in technical and safety related standards and practices within the gas industry by establishing effective liaison with international, national and local gas federations and by working with them to achieve international consistency; and to review accidents and identify their causes for the purpose of providing guidance of preventing their recurrence or minimizing their consequences." ATHCac It commenced operations on May 10, 2008. In reply, please be informed that this Office cannot as yet issue the requested ruling/certificate of tax exemption because the Federation 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. It can file the necessary annual information return 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 (Rev. Regs.) 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 letter of exemption shall thereafter be issued depending upon the result of our investigation. However, the Federation is subject to the corresponding internal revenue taxes imposed under the Tax 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, the 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. Moreover, it is required to file on or before the 15th day of the fourth month following the close 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 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. It should be understood that the Federation shall be constituted as a withholding agent of the government if it acts as an employer and its employees receive compensation income subject to withholding tax under Section 79 (A), Chapter XIII, Title II of the Tax Code, as implemented by Rev. Regs. No. 2-98, as amended, 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, as amended, and as implemented by Rev. Regs. No. 2-98, as amended. Finally, the corporation's books of accounts and other pertinent records shall be subject to examination by the Bureau of Internal Revenue for the purpose of ascertaining whether it is complying with the conditions under which it has been granted tax exemption and its tax liability, if any. For purposes of securing a permanent exemption after the three (3)-year period, the Federation is required to submit the following documents pursuant to Revenue Memorandum Circular No. 14-2001: 1) SEC Registration; 2) Articles of Incorporation which must include the following provisions: i) that the corporation is non-stock, non-profit; ii) that the primary purpose for which it was created is one of those enumerated under Section 30 of the Tax Code; iii) that no part of the net income shall inure to the benefit of any of its members; iv) that the trustees do not receive any compensation; and v) in case of dissolution, assets of the corporation shall be transferred to similar institution or to the government; 3) By-laws; 4) Annual Information Returns for the past three (3) years; and 5) Financial Statements (balance sheet) for the past three (3) years. Please be guided accordingly. ECDHIc Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service