BIR Ruling No. 720-2019

REPUBLIC OF THI. PHILIPPINES

: DEPARTMENT CF FINANCE BUREAU OF INTERNAL REVENUE Quezon City

Section 30 (J) of the NIRC of BIR Ruling No. 466-2014 20-2013: RMC No. 051-14 1997, as amended; RMO No. E2 2"2013 -211

Cabasagan, Matanao, Davao Del Sur 8003 BOTILON IRRIGATORS' ASSOCIATION, INC.

Attention: ALFREDO 0.PASAGDAN

President

Gentlemen:

stock. non-profit corporation or association under Section 30 (J) of the National Internal Revenue Code of 1997, as amended. IRRIGATORS' ASSOCIATION, INC. for tax exemption certificate being enjoyed by non- This refers to your letter dated October 3, 2016 applying in behalf of BOTILON

Organized and existing under the laws of the Republic of the Philippines: that it is registered with the Securities and Exchange Commission (SEC) under Company Registration No. Taxpayer's Identification Numher (TIN) Number OCN It is represented that of BOTILON IRRIGATORS' ASSOCIATION, INC. with BIR ; and that the purposest for which the association was incorporated are: dated February 18, 2013, is a non-stock corporation duly : and Certificate of Registration

To serve as a channel for the government and private agencies in providing technical and financial assistance and other essential service concerning irrigated agriculture:

To promote continuous group action/cooperative work thereby enhancing the'execution of farm activities to benefit the water users;

3 To cooperate and eventually assume the operation and maintenance of the irrigation system or a portion thereof under such terms and conditions that

the NLA Board may impose: and

+. To perform ull and everything necessary for the attainment of the purpose or in the furtherance of any of the corporate powers above set forth.

Section 30 (J) of the National Internal Revenue Code of 1997, as amended, provides, viz: organizations that are exempt from income tax in respect to income received by them as such. 1997, as amended, enumerates the non-stock and/or non-profit corporations/associations/ In reply, please be informed that Section 30 of the National Internal Revenue Code of

not be taxed under this Title in respect to income received by them as such: "Sec. 30. Exempt from Tax on Corporations. - The following organizations shall

I Second Provision. Articles of Incorporation of Botilon Irrigators' Association. Ine.

BOTILON IRRIGATORS' ASSOCIATION, INC

AY

purpose of nieeting its expenses: xxx or like organization of a purely local charucter. the income of which consists miutuul ditch or irrigation compamy, mutual or cooperative telephone company. solely of assessnments. dues. umd fees collected from members for the sole 4J) Farmers' or other mutual tvphoon or fire insurance compav.

to the institution's purposes and all its activities conducted not for profit" 3 trustees, or officers" and that any profit "obtained as an incident to its operations shall. whenever necessary or proper, be used for the furtherance of the purpose or purposes for which the corporation was organized" accrues to or benefits any member or specific person, with all the net income or asset devoted "Non-stock" means "no part of its income is distributable as dividends to its members. 2 "Non-profit" means that "no net income or asset

its earnings or assets shall not inure to the benefit of any of its trustees, organizers, officers, members or any specific person. The following are considered "inurements"of such nature: entity to qualify as a non-stock and/or non-profit corporation/association/organization exempt from income tax under Section 30 of the National Internal Revenue Code of i997, as amended. Revenue Memorandum Circular (RMC) No. 51-2014 has clarified that in order for an

1. The payment of compensation, salaries, or honorarium to its trustees or organizers; xxx.

are receiving honorarium. to the association. Also, as shown in its submitted Financial Statements, the Board of Trustees it was disclosed that the Board of Trustees are receiving incentives for their services rendered In the submitted certifications of BOTILON IRRIGATORS' ASSOCIATION, INC..

association under Section 30 (J) of the National Internal Revenue Code of 1997, as amended. prohibits in the organization and operation of a non-stock, non-profit corporation. These acts the benetit of any individual or specific person. Thus, BOTILON IRRIGATORS' violate the requirement that no part of the net income or assets of the corporation shall inure to ASSOCIATION, INC. cannot be qualified' as a non-stock, non-profit corporation or IRRIGATORS ASSOCIATION, INC. These are forms of private inurements which the law are considered distributions of the equity (including the net income) of BOTILON The incentives and honorarium being received by the members of the Board of Trustees

covered by the exemption so claimed.56 (BIR Ruling No. 466-2014 dated November 19, 2014) exemptions are construed strictissimi juris against the taxpayer and liberally in favor Of the this reason alone, completely exempt an institution from tax.15 Thus, :statutes granting tar taxing authority. A claim of tax exemption must be clearly shown and based on language in linv too plain to be mistaken. Otherwise stated, taxation is the rule, exemption is the exception. The burden of proof rests upon the party claiming the exemption to prove that it is in fact Please bear in mind that, "being a non-stock and/or non-profit corporation does not, by

INC. to be exempted from income tax'on its income as a Section 30 (J) corporation is hereby denied as it failed to prove that it is a non-profit corporation. Therefore, of BOTILON IRRIGATORS' ASSOCIATION, INC. shall be treated as an ordinary corporation subject to in view of the foregoing. the request of BOTILON IRRIGATORS' ASSOCIATION,

5 C!R vs. St. Luke's Medical Center. Inc. [G.R. No. 195909 & G.R. No. 195960. 26 September 2012] : Section 87. Corporation Code + Certitication under Oath as to the Association's disposition of income and. Modus Operandi as to the " Quezon City and The City Treasurer of Quezon City vs. ABS-CBN Broadcasting Corporation [G.R. No. C!R vs. St. Luke's Medical Center. Inc.. G.R. Nos. 195909 and 195960 dated 26 September 2012 [66408. 6 October 2008]. Association's contemplated expenditures. both by Alfredo O. Pasagdan. the IA President

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7Z -o: BOTILON IRRIGATORS' ASSOCIATION, INC DEC i 2 2013

thirty percent (30%) income tax rate pursuant to Section 27 (A) and other internal revenue taxes imposed by the National Internal Revenue Code of 1997, as amended.

Please be guided accordingly.

Very truly yours.

iuta

EK-I-LMAT COPY FURNISHED: Commissioner of Internal Revenue CAESAR R. DULAY 030 69 6

REVENUE REGION NO. 19 -- Davao City Attention: Revenue District No. I 15 -- Digos City

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