BIR Ruling No. 329-2016

REPUBUICOFTHEPHILIPPIN

DEPARTMENTOF FINANC

RUREAUOFINTERNALREVENUE

Quezon City

E.O.No.93:RR No.31-03 BIR Ruling No.310-201

329-2016

DEPARTMENT OF NATIONAL DEFENSE Office of the Secretary Room 30I DND Building,Camp Gen.Emilio Aguinaldo 6-29-2016

Quezon City 1110

Attention: VOLTAIRE T.GAZMIN

Secretary of National Defense

Gentlemen:

Exchange Service (AFPCES) pursuant to Revenue Memorandum Order (RMO) No. 20-2013. Exemption Ruling in favor of the Armed Forces of the Philippines Commissary and This refers to your letter dated December 22. 2014. requesting for Tax

General Headquarters.It was established in 1972 by virtue of Letter of Instructions earnings of the Veterans Clains Settlement Fund at the disposal of the Armed Forces Support and Separate Units(AFPWSSUs) under thc command and control of the AFP LOI No.31 dated October 23.1972 issued by Ferdinand E.Marcos,authorizing the President of the Philippine Veterans Bank to set aside P5 million from the retained commissary and exchange facilities in military establishments all over the country for Forces of thc Philippines and their dependents. Ladies Cooperative Stores to be utilized for the management and operations of a the benefit of the veterans, their widows and orphans and the members of the Armed It is represented that AFPCES(TIN is one of the AFP-Wide

exempted from payment of income tax by virtue of Presidential DecreePD No.83 dated December 20.1972 and has received tax subsidy from the Fiscal Incentive and Review Board on its purchases from local sources. manufacturers. producers or suppliers of articles or commodities subject to excise tax and valued added tax (VAT in line with Executive Order(EO) No.93 dated December 17.1986. It is further represented that the AFPCES,since its start of operation, has been

policies and guidelines in the issuance of tax exemption rulings to qualified non-stock, non-profit corporations and associations under Section 30 of the National Internal Revenue Code (Tax Code of 1997.as amended which exempts from income tax the income derived by the corporations and organizations described therein received by them as such. In reply,please be informed that RMO No.20-2013 was issued to prescribe the

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exemption under Section 30 of the Tax Code of 1997.as amended. Thus. given the factual antecedents of AFPCES. it is not qualified for tax

Pertinent provision of PD No.83 is quoted below This law, however. does not exempt AFPCES from the payment of income tax. It is noted that AFPCES claims exemption from income tax under PD No.83.

purchases from local sources, manufacturers, suppliers and other laws and regulations." (Underscoring and emphasis MARCOS.President of the Philippines. by virtue of the powers in vested by the Constitution as Commander-in pursuamt to the Letter of Instructions cited abovedo hereby promulgate and decree as part of the law of the land that all for similar commodities or items under existing revenue and supplied) Chief of all the Armed Forces of the Philippines, and producers of commodities or items decided hy the AFP Exchange and Commissary Service to be sold to persons entitted io commissary and PX privileges under Letter of Instructions No.31 dated October 23.1972.as amended shall be free of all taxes. duties andother charges prescribed NOW.THEREFOREIFERDINANDE

Moreover, PD 1955.s.1984 of then President Ferdinand E. Marcos effectively among those exempted from the withdrawal of duty and tax privileges thereby restoring subject to certain exceptions. and AFPCES was not among those specifically mentioned. Fiscal Incentives Review Board (FIRB Resolution No.12-894 affirmed the withdrawal of the tax privileges of AFPCES and PC/INPSSS.Section 1 of EO No.93 withdrew the tax and duty incentives of AFPCES.EO 76December 2.1986 of then President Corazon C.Aquino amended PD 1955.s.1984 by including NAFPCES its incentives in 1986.However,EO No.933 was issued on December 17,1986 again withdrawing all tax and duty incentives granted to government and private entities. States: such as valued-added tax (VAT) and/or excise tax that may be imposed on its purchases of local goods. The above exemption. however, does not include exemption from income tax on the proceeds of the sale of the goods to the intended beneficiaries. Clearlythe above-cited provision only exempts AFPCES from indirect taxes

contrary notwithstanding, all tax and duty incentives granted to government and private entities are herebv withdrann, except. "Sec.1.The provisions of any general or special law to the

042337 rgi conionetynd prive edpriveu enterprises and or persons engaged in any economic activity and for other purposes. the Fiscal Incentives Review Board and for other purposes No.5-87 were withdrawn effective January 1.1990. Amending Section l of Presidential Decree No.1955.by including the New Armed Forees of the Philippines Commissary and Fxchange Service(NAFPCES and the PC/INP Service Stores System The cxemption privileges enjoyed hy AFPCES which were restored temporarity hy FIRB Resolutlon (PCINPSSS among theexemption Withdrawing all ta and duty incentives,subject to certain exceptions,and expanding the powers of

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a) those covered by the non-impairment clause of the

Constituion:

b)those conferred by effective international agreements to is a signatory: which the Government of the Republic of the Philippines

c) those enjoved by enterprises registered with:

() theBoard-ofInvestmentspursuantto

Presidential Decree No.1789,as amended (i theExportProcessingZoneAuthority

pursuant to Presidential Decree No.66,as

amended: (ii) the Philippine Veterans Investment

Development Corporation Industrial Authority pursuant to Presidential Decree No.538.as amended:

d) those enjoved by the copper mining industry pursuant to

the provisions of Letter of Instruction No.1416.

e) those conferred under the four basic codes namelv

( the National Internal Revenue Code,as the Tariff and Customs Code,as amended:

amended: (i) the Real Property Tax Code, as amended. the Local Tax Code. as amended

f those approved hy thePresident upon the recommendation of the Fiscal Incentives Review Board. (Emphasis supplied)

coverage of the withdrawal of tax and duty incentives, AFPCES is now subject to appropriate internal revenue taxes on its purchases and sales.While the tax exemption of AFPCES was restored temporarily pursuant to EO 76 dated December 2,1986,as amended by FIRB Resolution No.5-87,this was again withdrawn effective January 1 1990.through the issuance of FIRB Resolution No.12-89 dated July 6,1989 which states: Considering that APFCES is not one of those specifically excluded from the

0 42 3 3 7 Commissary and Exchange Service and the Philippine to endorse to the Department of Budget and Management the Subsidy availment of the Armed Forces of the Philippine ConstabularyIntegrated National Police Service Stores amount of P50 mllion only,representing taxes,duties and System through the Department of National Defense, in the "BE IT RESOLVED,ASITIS HEREBY RESOLVED

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to the terns and conditions of Executive Order No.76.as amended by FIRB Resolution No5-87.Provided.That the charges on items.commodities purchased and subsequently amount shall be chargeable against ihe Tax Expenditures Fund.pursuant to the terms and conditions of the Rules and Regulations to Implement the Subsidy Provision Under Executive Order No.93.Provided.Further.That the exemption privileges enioved bysubject outlets which were sold bv these outtets to their intended beneficiaries.pursuamt

herebywithdrawneffectiveJanuaryL1990. (Underscoring supplied restored temporarily by FIRB Resolution No. 5-87 are

instrumentalities exempt from income tax mentioned in Section 27(C)of the Tax Code upon which it is to operate, everything else must necessarily and by implication be excluded from its operation and effect.I Section 27(C provides: of 1997,as amended.Expressio unius est exclusio alterius,the mention of one thing implies the exclusion of another thing not mentioned. If a statute enumerates the things Finally, AFPCES is not among those government corporations, agencies or

"Section 27. Rates ofIncome tax onDomestic

Corporations.

XXX XXX XXX

corporations or associations engaged in similar business. special or general laws to the contrarv notwithstanding. all corporations, agencies. or instrumentalities owned or controlled by the Government. except the Government Service Insurance Svstem(GSIS),the Social Security System the local water districts(LWDs),and the Philippine(Charity Sweepstakes Office(PCSO),shall pay such rate oftax upon their taxable income as are imposed by this Section upon (CGovernmeni-ownedorControlled-Corporations. Agencies or Instrumentalities.-The provisions of existing SSS).the Philippine Health Insurance CorporationPHIC) industry,or activity."

042337 clearest grant of statute. exemption to prove that it is in fact covered by the exemption so claimed In case of doubt non-exemption must be favored. Taxes being the lifeblood of the government and necessary attributes of sovereignty.Thus,the State cannot be deprived of this most essential power and attribute of sovereignty by vague implications of law.Rather. being derogatory of sovereignty.the governing principle is that tax exemptions are to be construed in strictissimi juris against the taxpayer and tiberally in favor of the taxing authority: and he who claims an exemption must be able to justify his claim by the favor of the taxing authority. The burden of proof rests upon the party claiming Tax exemptions must be construed strictly against the taxpayer and liberatly in Along with police power and eminent domain. taxation is one of the three basic

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not to unduly suppress it.BIR Ruling No.310-2011 dated August 22,2011 that should be collected without unnecessary hindrance.every precaution must be taken

pursuant to E.O.No.93 and FIRB Resolution No.12-89.Thus.AFPCES,now being subject to tax on its sales of goods. has to comply with the following obligations entitled to exemption from income tax. Moreover. it is no longer entitled to tax exemption on its purchases of goods from local sources.manufacturers and suppliers In view of the foregoing. this Office is of the opinion that AFPCES is not

jurisdiction over the principal place of business/head office and pay the corresponding registration fee thereof. The BIR Certificate of Registration business establishment: I.Register its business at the Revenue District Office RDO having which shall be issued by the RDO must be displayed conspicuously in the

2.Secure Authority to Print ATP Official Receipts/Sales Invoices

List of Payees, etc., at the time or times required by cxisting rules and 3. File applicable tax returns on or before the due dates. pay correct internal reports such as the Summary List of Sales/Purchases (SLS/P),Annuai Alpha revenue taxes, and submit information returns and other tax compliancc regulations:

4. Keep books of accounts and other business/accounting records within the inspection and verification by duly authorized Revenue Officer/s for the purpose of ascertaining compliance with tax rules and regulations;and time prescribed by law. and such shall be made available anytime for

Certificate of Tax Withheld. 5.Withhold required creditable/expanded withholding tax.final tax.tax on compensation of employees.and other withholding taxes in accordance with Revenue Regulations No.2-98.as amended. Remit the same to the Bureau at the time or times required. and issue to the concerned payees the necessary

producers or suppliers of articles or commodities, subject to the observance of the guidelines for the availment thereof under Revenue Regulations No.31-2003 dated September 22.2003. AFPCES may avail a tax subsidy for its purchases from local manufacturers

Please be guided accordingly

Very truly yours.

Commissioner of Internal Revenue KIM S.JACINTO-HENARES

K-I-JHB 042337 JUN 4 2016