Catanduanes Upland Management and Development Center, Inc. (CUMDCI)

May 4, 2009 BIR RULING [NSNP-(S30J-001) 299-09] 27 (D) (1);S-30-008-2006 Catanduanes Upland Management and Development Center, Inc. (CUMDCI) Palawig, San Andres, Catanduanes Attention: Ms. Amenia S. Panti President Gentlemen : This refers to your letter dated January 5, 2009 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 Catanduanes Upland Management and Development Center, Inc. (CUMDCI) with Tax Identification Number (TIN) 004-205-041 is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. INO94-000057 dated March 17, 1994; that the purpose(s) for which the corporation was formed is to 1. To assist the upland farmers or occupants in the management and development of their areas in order to uplift their living conditions; 2. To serve as conduit in the implementation of government agencies and or other entities programs and projects for the development of upland communities; 3. To promote cooperation among all entities involved in upland and forest management and development which will guide the long-term viability and sustainability of community-based projects; 4. To plan, negotiate and receive donations from agencies or entities to support the implementation of programs and projects towards the development of upland communities; 5. To assist the government and other entities in the planning implementation and monitoring of forest management and development related programs and projects in Catanduanes; 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. EIAScH Based on the foregoing, this Office is of the opinion and so holds that the CUMDCI is a corporation organized for farmers or like organization of a purely local character as contemplated under Section 30 (J) 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, 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) HAaDTE 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service