BIR Ruling No. 574-2017

REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE

Quezon City

Section 30 of the National Internal Revenue Code of 1997, as amended

BIR Ruling No. 001-2017; BIR Ruling No. 444-201 4

571-20.7 17-7-20

AGUILAR-MENESES FOUNDATION, INC.

Madrigal Business Park, Alabang, Muntinlupa City I6th floor, The Paragon Corporate Centre, Industry St.

Attention: Ms. Ma. Cynthia A. Meneses

Treasurer

Gentlemen:

This refers to your letter dated April 27. 2016, as indorsed by the Regional Director. Revenue Region No. 8, Makati City, through 1st Indorsement dated June 21. 20 16, requesting on behalf of AGUILAR-MENESES FOUNDATION, INC. for the issuance of a certificate of tax exemption enjoyed by non-stock, non-profit corporation or association pursuant to Section 30 of the National Internal Revenue Code (NIRC) of 1997, as amended.

It is represented that AGUILAR-MENESES FOUNDATION, INC. with BIR Taxpayer's Identification No. (TIN) dated December 9, 2014, is a non-stock, non-profit association duly organized and Certificate of Registration No.

and existing under the laws of the Republic of the Philippines: that it is registered with the Sccurities and Exchange Commission (SEC) under Company Registration No. and with SEC Certificate of Incorporation dated October 24. 2014; and that the purpose for which it was organized is "to promote, encourage and assist researches and studies on scientific, technological, economic, environmental, cultural and other social concerns, finance scholarship and reseurch grants. and the creution of professional chairs in these fields. " among others.

In reply, please be informed that this Office cannot as yet issue the requested Certificate of Tax Exemption because AGUILAR-MENESES FOUNDATION, INC. has to prove by actual operation for at least three (3) years that it is really an association exempt from income tax under Section 30 of the National Internal Revenue Code of 1997, as amended. (BIR Ruling No. 001-2017 dated January 05, 2017)

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In the meantime, AGUILAR-MENESES FOUNDATION, INC. can file the necessary annual information return instead of an income tax return on or before the fifteenth (15th) day of the fourth (4th) month following the end of its taxable year as required under Section 24 of Revenue Regulations No. 2-40 dated February 10, 1940.' 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.

Thus, AGUILAR-MENESES FOUNDATION, INC. is subject to the corresponding internal revenue taxes imposed under the Nationa! Internal Revenue Code of 1997. as amended] 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.

royalties derived from sources within the Philippines are subject to the twenty percent (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 benefits from deposit substitute instruments and from trust funds and similar arrangements, and Likewise, interest income from currency bank deposits and yield or any other monetary

tax pursuant to Section 27 (D) (1), in relation to Section 57 (A), both of the National Internal Revenue Code of 1997, as amended. (BIR Ruling No. 444-2014 dated October 30, 2014)

Also. it should be understood that AGUILAR-MENESES FOUNDATION, INC. shaH

receives compensation income subject to the withholding tax under Section 79 (A), Chapter XI11. Regulations No. 2-98, as amended, or if it makes income payments to individuals or corporations be constituted as withholding agent of the government if it acts as an employer and its employee subject to the expanded withholding tax provided for in Section 57 (B) of the National Internal Revenue Code of 1997, as amended, also as implemented by Revenue Regulations No. 2-98. as Titie I1 of the National Internal Revenue Code of 1997, as amended, as implemented by Rcvcnuc

eded

Moreover, under Section 235 of the National Internal Revenue Code of 1997, as amended.

accounts and other pertinent records of tax-exempt organization or grantees of tax incentives shall be subject to cxamination by the BIR for purposes of ascertaining compliance with the conditions under which it has been granted tax exemptions or tax incentives, and its tax liabilities, if any. any provision of existing general and special law to the contrary notwithstanding, the books of

Pesos (PhP500.00) as prescribed in Section 236 (B) of the National Internal Revenue Code of invoices for each saie or transfer of merchandise or for services rendered which are not directly related to the activities for which the Association is registered under Section 6 (C) in relation to Section 237 of the same Code (Revenue Memorandum Circular (RMC) No. 76-2003). 1997, as amended. It is also required to issue duly rcgistered reccipts or sales or commercial Furthermore, it is subject to the payment of the annual registration fee of Five Hundred

I Collector vs. Sinco. G.R. L-9276 dated October 23. 1956

Page 3 of 5 Aguilar-Meneses Fnd., Inc. 574-2017 12-7-2017

Value-Added Tax/Percentage Tax

Section 105 of the National Internal Revenue Code of 1997. as amended. provides that:

business. sells. barters. exchanges. leases goods or properties, renders services "SEC. 105. Persons Liable. - Any person who, in the course of trade or

and any' person who imports goods shull he subject to the value-added tax (FAT) imposed in Sections 106 to 108 of the same Code.

X.X XXX XXX

The phrase "in the course of trade or business" means the regulur conduc? or pursuit of a commercial or am economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a non-siock. non-profit private organizution firrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government enity.

XXX XXX XXX

Accordingly. if AGUILAR-MENESES FOUNDATION, INC. is engaged in the sale of goods or services in the coursc of a business pursuit. including transactions incidental thereto. in general, it shall be liable for 12% VAT. in case the gross receipts from such sales exceed One Million Nine Hundred Ninetecn Thousand Five Hundred Pesos (f1,919.500.00), or to the 3% percentage tax. if gross receipts do not exceed P1.919.500.00.

It must be noted that VAT is an indirect tax payable by the seller and not by the purchaser of goods. Being an indirect lax. the amount of tax may be shifted or passed on to the buyer/purchaser. transferee or iessee of the goods, properties or services. Once shifted to the

additional cost which the buyer/customer has to pay in order to obtain the goods or services. buyer/customer as an addition to the cost of goods or services sold. it is no longer a tax but an

However. revenue from contributions and donations. not being derived from sale of

non-profit activities. is exempt from the 12% VAT. services or sale of goods made in the course of business but rather in connection with its non-stock.

after the three (3)-ycar period. AGUILAR-MENESES FOUNDATION, INC. is required to submit the following documents pursuant to Revenue Memorandum Order (RM0) No. 20-2013 dated July 22, 2013: Finally. forpurposes of securingaCertificate ofTax Exemption

A. Originul copy of application letter for issuance of" Tax Exemption Ruling. The tetter shall cite the particular paragraph of Section 30 of' the Nanonal Internal Revenue Code of 1997. as amended. under which the application for exemption I revalidation is being based:

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Aguilar-Meneses Fnd., Inc. Page 4 of 5

B. SEC Certified true copy of its Certificate of Incorporation;

C. SEC Certified true copy of its Articles of Incorporation or latest Amended following provisions: Articles of Incorporation which must specifically include and clearly state the

1. That the association is non-stock, non-profit,

2. That the primary purpose for which the association was created is one of those enumerated under Sec. 30 of the National Internal Revenue Code of 1997. as amended.

3. That no part of the net income of the association shall inure to the benefit of any its members or private individual:

4. That the trustees of the non-profit association do not receive amy compensation; and

5. In case of dissolution, its assets shall be distributed to one or more entities formed for the purpose I purposes similar to its own, or to the Circular No. 51-2014): Philippine government for public purpose (Revenue Memorandum

D. SEC Certified true copy of its By-Laws or latest Amended By-Laws:

E. Original copy of a Certification under Oath by an executive officer of the

association as to:

1. all previous amendments / changes in the Articles of Incorporation and state this fact); By-laws (If there are no amendments / changes, the Certification shall

2. manner of activities; and

3. the sources and disposition of income, if any, of the subject association:

F. Certified true copy of its BIR Certificate of Registration;

G. Original copy of a Certification under Oath by the treasurer of the association the association to its trustees, officers and other executive officers; as to the amount of income, compensation, salaries or any emoluments paid by

H. Original copy of a Certification issued by the Revenue District Office (RDO) pending investigation, on-going audit, pending tax assessment, administrative where the association is registered that the association is not the subject of any

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protest, claim for refund or issuance of tax credit certificate, collection proceedings, or a judicial appeal; or if there be any, the original copy of a Certification issued by the RDO on the status thereof;

I. Certified true copies of its Income Tax Returns or Annual Information Returns

and Financial Statements for the liast three (3) years of operation; and

J. Original copy of a Statement under Oath by an executive officer of the

association as to its modus operandi which shall include:

1. A full description of the past, present. und proposed activities of the

association:

2. A narrative description of anticipated receipts and contemplated

expenditures; and

3. A detailed description of all revenues which it seeks to be exempted

from income tax. All other revenues which are not included in the statement or application shall be subject to income tax.

This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void.

Very truly yours.

AaawN

Commissioner of Internal Revenue CAESAR R. DULAY 011638 K-1-MCUS mcusT

COPY FURNISHED:

Attention: Revenue District Office No. 53B -- Muntinlupa City REVENUE REGION NO. 8 - Makati City